One in four UK third-party motor claims now involves a bodily injury element according to Towers Watson and UK insures paid out £1.24 for every £1 of premium received.

Towers Watson said that while road usage has fallen to the lowest levels since 2005 in the UK, most likely as a result of high petrol prices, the frequency of reported accidents with a third-party injury claim has risen by over 6% per year since 2008.

The cumulative effect meant private motor insurers paid out nearly £1.24 for every pound of premium they received in 2010, compared to £1.21 in 2009, based on figures submitted to the Financial Services Authority - despite Confused.com/Towers Watson Car Insurance Price Index recording average price increases of 38% for new comprehensive policies during 2010.

Any chance of improving 2009's already disappointing industry figures were wiped out by some companies increasing reserves to guard against the worsening claims situation, Towers Watson said.

Across the private motor sector, nearly 8% of premiums (over £500m) went towards setting cash aside to meet the cost of the UK's increasingly entrenched claims culture.

This reversed the trend of the last several years where firms have typically used prior year reserve releases to improve their overall results, albeit that many companies remained in the red over that time.
Towers Watson's analysis points out, however, that because of the clearer information that has also become available about prior year claims, the 2010 figures may hide some positives from the actions already taken by insurers.

Towers Watson director, Duncan Anderson said:

"By allocating claims to the year in which they happened, the true losses for private motor business in 2010 stand at around 16p in the pound compared to 28p in the pound for accidents in 2009.
Significant new business rate increases introduced in 2010 may have started to move underlying profitability in the right direction.

"The headline figures are still however clearly bad, and private motor insurers, with a few exceptions, still have some way to go to return to profitability.
While there are early signs that the actions taken so far are having an effect, it will remain important that recent emerging claims patterns, and the reasons for them, are tackled on multiple fronts.
This includes using customer analytics techniques to enhance underwriting and combat fraud, as well as appropriately reflecting changing bodily injury experience in premium rating structures."