The UK motor insurance market is poised to record a strong uplift in profits in 2018 if changes to the Ogden discount rate for personal injury claims and whiplash reforms go ahead, according to EY.
The firm’s latest analysis of the UK motor insurance market found it likely that 2017 profitability will be close to breaking-even at 100.8 percent net combined ratio (NCR).
June’s NCR forecast for 2017 was 103.3 percent.
EY made its revision to 2017 profitability due to the revised proposals for the Ogden discount rate for personal injury claims published in September. The Ministry of Justice expects these changes to result in a new rate of between 0 and 1 percent.
Motor premium rates are currently at record highs, having risen 10 percent over the past 12 months, according to EY.
The revision to Ogden is likely to lead to a fall of between 2 and 4 percent on average premiums, saving up to £21 annually for the average motorist.
The whiplash reforms should provide further relief to motorists, with an additional 8 to 10 percent reduction in premiums starting later in 2018, totalling a saving of £45 per year once the reforms are fully implemented.
The NCR for 2018 is expected to be solidly in the black at 98.5 percent, according to EY.
Tony Sault, UK general insurance leader at EY, commented: “The revised Ogden Rate proposals in September have provided something of a reversal in the motor insurance industry’s fortunes.”
“While the changes announced earlier in the year meant the insurance industry was facing an additional cost of £3.5 billion, the revised proposals could see up to £2.5 billion shaved off this figure. The reversal is also expected to have a positive effect on premium rates for consumers and we would expect the premiums to start to fall next year in anticipation of the new legislation coming into force.”
Sault added: “The proposed whiplash reforms are also expected to benefit claims costs and premiums later next year, although there is a risk that the weight of Brexit legislation will not leave Parliament enough time to pass the promised Civil Liability Bill. The industry, though, is certainly facing a much better end to the year than it had feared back in February and its prospects are looking a great deal brighter.”