Insurance premiums rise despite big reductions in personal injury compensation payments

Posted Jul 27, 2018.
In what has been described as the ‘best year this century’, newly published figures show that 2017 was a stellar year for UK insurance companies, mainly due to rising motor insurance premiums and a fall in personal injury compensation claims.

UK insurance companies have long promised reductions in insurance premiums if something could be done about supposedly rampant personal injury claim payouts. Such ‘insurer friendly’ changes via the Civil Liability Bill are due to come in in 2019 (although these may now be delayed until 2020), in a move that will massively restrict an innocent injured individuals ability to claim legitimate compensation for a range of accident types, but in particular for whiplash injury claims. Despite these forthcoming changes, and ongoing reductions in personal injury compensation awards, it would now appear that UK motorists will now not benefit from the promised premium reductions anytime soon.

Bad news for the motorist, but good news for the shareholders of the insurers.

The figures come as the Civil Liability Bill has finished its passage through the House of Lords and has been introduced to the House of Commons. According to EY’s annual UK motor insurance results report, the net combined ratio (NCR) – the sum of net claims, commissions and expenses divided by net earned premium – was 96.8% last year, meaning that for every £100 of premium received, insurers paid out £96.80. 

The figure was 109.4% in 2016, but the 2017 outcome was the second best result since records began in 1985.The report states that in 2017, personal motor insurance cost consumers on average £480, up 8.7% from £442 in 2016, and reaching a peak of £491 in the fourth quarter of the year, with the main driver being the original discount rate change.

However, EY said premiums began to reduce in the early part of 2018 and were expected to remain on a downwards trend until early next year:

The key reasons are the increasing competition by insurers for a share of the market, together with reductions in the level of whiplash claims from the anticipated effect of the whiplash reforms in the Civil Liability Bill which is currently progressing through Parliament.
“EY predicts prices to fall to £471 over 2018 and £455 over 2019; with the benefit of the whiplash reforms equivalent to approximately £35 per policy.”