THe prospect of higher car insurance for millions of motorists reared its head yesterday after one of the industry’s biggest players said it was planning to drive up premiums.
Esure, which also owns Sheilas’ Wheels and the price comparison website Gocompare, said it had seen a surge in small injury claims, helping to push half-year profits in its motor insurance underwriting business down by four-fifths.
Chief executive Stuart Vann warned: “The claims environment in the motor market continues to deteriorate and as a consequence we will seek to implement further rate increases in the second half of the year as we look to mitigate against these trends.”
While the group has some 1.4 million motor insurance policies, it is unlikely to be the only big name considering a hike in premiums.
A recent AA report showed that the average comprehensive motor insurance policy had risen by 5.5 per cent in the second quarter across the industry after years of decline. The same report also pointed to claims inflation – more frequent claims with higher damages.
At the time, the managing director of AA Insurance, Janet Connor, warned: “The days of cheap car insurance premiums are over, and price rises are inevitable.”
We will seek to implement further rate increasesStuart Vann
Esure’s first-half trading profit for motor insurance underwriting was down 80.7 per cent to £3.3 million as it was “impacted by claims inflation, in particular the market increase in the frequency of small personal injury claims”. The fall helped underlying pre-tax profits for the first six months of the year slide 21.3 per cent to £46.5m.
Half-year profits for home insurance were up 31.5 per cent to £7.1m compared with a period last year when it took a £2m hit due to bad weather.
Meanwhile, pre-tax profits at Gocompare were up 25.2 per cent to £13.4m after the group snapped up the 50 per cent of the business it did not already own.
Vann said there were significant opportunities to at least double the website’s underlying earnings over five years.
Shore Capital analyst Eamonn Flanagan said the latest results for the group, which has about 570,000 home insurance policies on its books, were worse than he had expected and that the rate increases were likely to impact on business volumes.
Reiterating his “sell” recommendation on the shares, Flanagan said: “The motor result was disappointing due to the deteriorating claims environment, especially in small personal injury claims, household benefited from better weather and the ancillary income was boosted by a 43 per cent increase in ‘claims income’ to £4.3m.
“The company warned of tough claims conditions in UK motor. In H1, motor profits collapsed to £3.3m from £17.1m due to the problems with small personal injury claims, a feature Esure seems to be struggling with.”