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Zurich leads the market on personal lines motor rating action

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Zurich in the UK is advising that it will be taking strong rating action on its personal lines motor business, to combat the impact of escalating claims trends. While action has already been taken over the last 18 months, a significant increase in third party claimant costs is emerging that requires further rating correction.

Zurich, along with the rest of the industry, has seen a substantial rise in the average cost of third party damage claims and the frequency of bodily injury claims, both of which have contributed to the unsustainable motor market combined ratio in recent years. However, this trend, predominantly driven by the substantial referral fees being seen through claims farming, has escalated rapidly during 2009, making it a priority area for insurers to address over the coming months.

Steve Lewis, CEO of UK’s General Insurance business said: “We have seen a 30 per cent increase in bodily injury frequency with a worsening trend throughout 2009. This, combined with high inflation, has resulted in a 50% increase in the cost of covering bodily injury losses in the last few years.  With this trend showing no signs of slowing down, we are taking decisive steps to lead the market in driving the corrective rate action that the motor line of business clearly needs. As a result we will move rates on our broker business by as much as 20% in March to address this trend, over and above the rating action we have already taken.  As this is an industry and distribution-wide issue, our colleagues in the Direct channel are taking similar action on their book. However, if the trends in bodily injury and related claims farming activity continue even this may not be enough.  As an escalating market issue, we recognise that all insurers will be seeing this trend, but by acting now, we can move quickly to provide our customers with a sustainable level of long term pricing.”

“Indications that the PL motor market is running at 120%+ COR, means the pressure is on all insurers to bring about an improvement in the market performance.  At Zurich, our approach over the last year has been to responsibly address emerging issues as they arise and we continue to believe that acting quickly and decisively is the best approach for all our stakeholders.”