By Ralph Savage
After a Channel 4 dressing down by Dispatches, the insurance industry’s relationship with UK motorists is likely to be a defining issue for 2013.
The alleged role in which some insurers themselves have played in contributing to claims inflation is now a matter of very public record. So what if the industry is forced, like the Coalition Government, to inflict further austerity on the public?
12 months ago, I blogged about what I thought the UK general insurance industry’s most likely headaches would be in 2012, positing a pentangle of potential problems which faced the nation’s captains of risk transfer.
In retrospect, I may have been a year early with a couple of those predictions but with reputation topping that list it’s hard not to choose a repeat number 1 if they fail to bring premiums under control.
The industry has done well to force its position within the debate and has had significant success in directing policy discussion around reducing legal costs with a consultation on fixed fees for low value claims currently under way.
However with the Prime Minister himself already declaring a government victory against rising premiums, it’s clear Whitehall will expect something in return from the underwriting community. In his mid-term statement, David Cameron said: ‘We have helped to reduce car insurance premiums by reforming “no-win, no-fee” agreements and introducing new measures to bring down the number and cost of whiplash claims.’
It’s probably safe to say Number 10 didn’t clear that particular point with anyone at the Association of British Insurers.
Meanwhile, the market is facing a continued period of belt tightening which, according to Standard & Poors, means the industry cannot rely on reserve releases as it once did to support a less draconian rating environment.
The upshot of this may be a year in which insurers are unable to push through genuine reductions in premiums and therefore should prepare for a year of austerity tactics. The industry’s reforming zeal will hopefully influence claims inflation downward but it remains to be seen how quickly insurers will benefit from the fruits of its lobbying labours.
For an industry which at the best of times enjoy a grudging relationship with motorists, 2013 could be its most challenging yet.