Three insurance companies have posted healthy profits in their 2017 first half interim results. Has this also led to a reduction in the cost of car insurance premiums charged to drivers?
Aviva’s half year results for 2017 show that its overall operating profit rose by 11%. They also show that UK motor insurance premiums increased by 9% (from £530 million to £580 million). The dividend paid out to shareholders went up by 13%.
AXA also reported strong half year performance with a 4% increase in underlying earnings, and a 6% growth in revenue from UK motor insurance.
Direct Line reported a 9.5% increase in operating profits in its interim half year results for 2017. In early 2017, Direct Line increased its motor insurance prices to its customers by 6.6%, compared with the same time in 2016. They blamed the increase on proposed plans to adjust the Discount Rate and on an “anticipated increase in claims inflation”.
However, in its interim results paper, the Direct Line Group said that “bodily injury claims continued to trend more favourably than expected”. In simple terms, this means that it has paid out less than expected. The insurer also said that its motor line continued to grow gross written premiums. These were up 10%, with Direct Line driving the growth.
Do Drivers Benefit from Insurer’s Profits?
Claimant lawyers have asked insurers to justify profits at a time when the average cost of comprehensive car insurance cover is at a record high of £690 – an increase of 19.6% in a year. Insurers do not detail how they calculate premiums but a need to be more transparent is gaining momentum. Earlier this month, The Daily Telegraph revealed that repair costs were being inflated by insurers as much as 100%. Their report showed that some insurers were doubling the actual cost of car repairs in exchange for financial kickbacks.
The Government is under pressure from insurers to change the law. Insurers want to make it more difficult for those injured on the roads or at work to claim for damages. They argue that this was the only way to lower prices for motorists, but behind the scenes insurers are not passing on profits to car drivers.
We know that last year road accident claims dropped by 7% and workplace accident and disease claims by 21%. Insurers have stated that a recent increase in the way that future damages are calculated will impact their profits and suggest that savings will be passed on to drivers. We wait to see if this will happen, especially as the Government are set to again reduce the calculations for future damages for injured clients. Will this saving be passed on to drivers if that happens?