Links

Big motor insurance rises likely

Dan Atkinson and Liz Stuart

Motor insurance premiums are likely to rise by 20% to 30% in the wake of last week`s torrential rains and floods, which caused catastrophic damage to thousands of vehicles, a senior industry source said yesterday.

An immediate rise in household insurance rates is not expected. Abbey National spokesman Gug Kyraivou said;

"Normally it takes a couple of years of flooding to make a big enough dent that policies have to go up in price". But a senior Lloyd`s source said: "Customers will feel the pain in motor insurance".

Lloyds members have posted losses on this business for 1995 and are expected to post further losses for 1996 and 1997. Tony Baker, deputy director general of the Association of British Insurers, said of the industry`s losses from the deluge: "This looks much bigger than the £300 million weather event in December and January. It looks as if it could easily be ?£500 million". Too much capital investment has poured into British insurance generally, with particularly fierce competition in motor insurance. Claims for the huge amount of vehicle damage suffered over Easter will not only burn off some of this capital but is also likely to prompt the industry to look at the need for higher rates.

A more pessimist outlook for households came from Jeffrey Salmon of the insurance negotiator Salmon Assessors. Early estimates of ?500 million could be "drastically out", he said. "We believe it is going to be somewhere between £1.2 billion and £1.5 billion". £1.2 billion was paid out after the 1987 hurricane.
All premiums could rise by up to 35% in the next nine months, he warned. Fears of a rise in motor premiums has also been caused by the arrival in Britain of US investment supremo Warren Buffett, known as the Sage of Omaha, who is involved in a Lloyd`s syndicate with motor interests and in a new vehicle insurance company.

Insiders see his arrival, of one of most successful investors of all time, as a sure sign of bigger profits to come from motor insurance after years of losses. If his instinct holds good it may herald better times for shareholders and tougher times for motorists.

The motorist has had several happy years during which a large number of companies - some backed heavily by US capital - have chased too little business. As some companies are forced to merge to survive, however, the driver can expect to pay bigger premiums to fewer insurers.

Site Map

Text Only |