EMB highlights motor insurance sustainability issues - Published 2nd Feb 2010
Consultancy firm EMB has highlighted the problem of sustainability in the motor insurance sector as returns continue to suffer due to the credit crunch.
According to EMB, the British motor insurance industry has been relying on reserves created during more profitable years.
However, the firm noted that releasing large amounts of equity from reserves is not a sustainable practice.
"The practice has made it possible for otherwise loss-making companies to announce reasonably healthy figures," said EMB.
"However, at some point the unsustainability of this situation was always going to become evident. That moment of truth has arrived and it has done so at the worst possible time when investment income is virtually non-existent," the firm added.
Last month, Zurich announced that it was set to drive up the cost of its motor insurance premiums by as much as 20 per cent to cope with the rising tide of third-party insurance claims and an increase in the frequency of injury claims.
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Consultancy firm EMB has highlighted the problem of sustainability in the motor insurance sector as returns continue to suffer due to the credit crunch.
According to EMB, the British motor insurance industry has been relying on reserves created during more profitable years.
However, the firm noted that releasing large amounts of equity from reserves is not a sustainable practice.
"The practice has made it possible for otherwise loss-making companies to announce reasonably healthy figures," said EMB.
"However, at some point the unsustainability of this situation was always going to become evident. That moment of truth has arrived and it has done so at the worst possible time when investment income is virtually non-existent," the firm added.
Last month, Zurich announced that it was set to drive up the cost of its motor insurance premiums by as much as 20 per cent to cope with the rising tide of third-party insurance claims and an increase in the frequency of injury claims.
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