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Fitch Ratings said that the trading update released today by Admiral leads it to question the ability of underwriters to control the rising cost of motor claims involving personal injury.
Fitch said that UK motor insurers have been successful in significantly increasing personal motor premiums over the last 18 months, which has helped to restore profitability.
Young drivers now pay up to 70% more for their cover than at the start of 2010. Yet we are sceptical that the insurance industry has successfully addressed the key issues of widespread detection of fraudulent claims and the steep rise in awards for bodily injury claims.
Fitch said that it believes that insurers that deal with these issues through tighter underwriting terms and better claims management will hold an advantage over competitors that focus solely on pricing.
It said that insurers’ costs have been inflated by a rise in the cost of settling bodily injury claims, as well as an increased propensity for those involved in road traffic accidents to pursue a personal injury claim.
Whether this trend is due to the encouragement of ‘claims farming’ – a process of distributing claims out to solicitors – or from increased fraudulent activity, prompted by harder economic times, is unclear.
It said that the recent EU gender ruling, which will prohibit insurers from setting insurance prices along gender lines from December 2012, will provide insurers with a good one-off opportunity to raise prices further.
It added that it does not expect premium increases to fall evenly across the motoring demographic, with younger, less experienced female drivers expected to incur the greatest rises.
The current economic climate means customers will be highly sensitive to the rises. It said that the most successful companies will use factors such as postcode, age and driving experience to set insurance premiums.
Original Article: Post
Medico Legal News Source: Claims Standards Council
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