Car insurance rates seen levelling off

Motor insurance rates are expected to level off in 2006 with not much change expected for the year in respect of cover, limits and deductibles, according to leading South African insurers. "However, they do believe that capacity is beginning to reduce as insurers/reinsurers are becoming more sceptical about motor as a profitable class of insurance, presumably this is based on the adverse underwriting results reported towards the end of 2005, which was mainly due to the rising costs of repairs in the motor industry," says Diann Johnson, a senior broker at Alexander Forbes Risk Services. Johnson says that in 2006, insurers will be faced with the challenges of defending their current market share and growing their book of business in terms of this class of insurance, while still maintaining underwriting disciplines in order to focus on profitability. "Insurers have predicted that during 2006, we should expect to see a levelling off in rates where they will provide terms on an 'as expiring basis' rather than the reduced rates which we saw during 2005," says Johnson. Some insurers feel that, if they do not see some increases in rates soon, the premium reductions experienced during 2005 will disappear altogether during 2006. An overall decline in hi-jacking and theft of motor vehicles over the past few years, resulted in competitive rates during 2005. Any increased premiums during 2005 were mainly due to client-specific adverse claims experience. "With regard to 1 January 2006 renewals, insurers remained very competitive. They are still prepared to provide increased limits while deductibles remained flexible. However, they moved away from a percentage- of-claim deductible to a fixed-figure basis. Insurers are also still keen to provide cover on a retail value basis," says Johnson. Source: business.iafrica.com