News broke during April that the motor insurance market has just had its best year since Sven took the 'Golden Generation' to Germany. So now as 'Roy's boys' prepare for Brazil, we ask - how did they do it?
April provides a unique opportunity for analysts to peruse the results of all the stock market listed motor insurers and reports of a study by EY that motor insurers as a whole may be approaching profitability was welcomed in the trade press.
Margins in this line of business are narrow and 2013 still saw the cohort of listed motor insurers returning a collective combined operating ratio (COR) of 101% meaning claims and expenses overall were continuing to outweigh premium income, but this represented an improvement of 2.5% on the previous year. The figures were interesting particularly owing to an overall 8.8% drop in premium income for the sector, suggesting a tightening up on expenses and claims.
Pointing out that the sector has not reported a COR beneath 100% for 20 years, EY pointed to the fact that add-on products such as personal accident and before the event legal expenses insurance have supported insurers writing core products at lower prices "for some time, so in many cases customers should expect to experience price rises on their core motor of home products."
One insurance company not included in that analysis was the Cooperative, which, contrary to popular belief actually had an excellent 2013. Despite huge losses emanating from its banking division, Cooperative Insurance profits surged to £33.6m. This was in spite of a fall in premium income from £555.7m to £443.6m; the insurer's strategy to pursue underwriting profit resulted in a COR dipping below 100%.
Elsewhere in the insurance industry, the prospects for some defendant solicitors supporting insurers appeared bleak when QBE announced that its panel would shrink by a quarter, with 12 firms retained by the company. Claims Director Dominic Clayden went on to say that it was looking to improve claims customer service, "as well as indemnity", a sentiment which may ring in the ears of the Financial Conduct Authority, after the regulator conducted a review of claims handling in which customer satisfaction rates for household claims (65%) and travel claims (64%) were identified alongside a number of issues that could impact the customer experience in the long term such as the recording and usage of inbound calls.