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Recent years of exceptional profits at an end

Standard of driver behaviour has improved over the last 12 months

Industry opinion divided on premium outlook for 2008

Over 80% of Irish motor insurance companies said that their company decreased premiums in 2007, the majority by up to 10%, according to a survey for the Deloitte Motor Insurance Seminar. Less than one in ten respondents said premiums had increased.

Opinions in the motor insurance industry on the outlook for premiums in 2008 are mixed. Over 40% of respondents believed that premiums would increase by 0-10%. However, an additional 40% also predicted that premiums would decrease by 0-10%.

Analysis of the Insurance Statistical Review 2006 and returns made to the Financial Regulator show lower profitability for motor insurance companies in the 2006 accident year.  In addition, the research by Deloitte reveals that there is uncertainty among industry players with regards to profitability - the industry may have to accept that the higher profits experienced in previous years may now be a thing of the past.

Speaking at the third annual Deloitte Motor Insurance Seminar, Dick Tulloch, Director, Actuarial Services, Deloitte said: “Initially, the Insurance Statistical Review appears to show reasonably healthy profits within the motor insurance industry, albeit they are not as high as previous years. However, further analysis shows that motor insurance companies have once again released a significant amount of reserves. Therefore, the figures do not reflect the actual underwriting performance of the last accident year. This begs the question as to how many reserves are left to be released – and will companies be able to maintain profits in this way in coming years?”

The survey of motor insurance representatives attending the annual motor insurance seminar confirmed that there were mixed feelings regarding trading conditions in the motor insurance industry – while nearly 45% of respondents were more optimistic about conditions, over 35% were less optimistic than last year.

Over 70% of respondents believed the Personal Injuries Assessment Board (PIAB) was having a positive impact on compensation culture. In addition, over 70% were more optimistic about road safety, up from 56% last year. Similarly, over 60% of respondents believed that the standard of driver behaviour has improved over the last 12 months.

Commenting on the results of the survey, Glenn Gillard, Partner, Financial Services, Deloitte said: “It’s clear from the mixed responses received in the survey that there is a substantial level of uncertainty within the industry itself as to future profitability.

We believe that motor insurance companies will come under pressure to decrease premiums - as the general public become more sympathetic with road safety measures and the PIAB continues to have a positive impact on compensation culture, there will be very little justification for increased premiums. This will ultimately affect profitability – the recent years of exceptional profits may well be over.”

Deloitte’s annual Motor Insurance Seminar addresses the challenges and trends in the current motor insurance climate and is attended by representatives, of all levels, from motor insurance companies in Ireland, and also representatives from insurers in the UK.

• Learn more about the Motor Insurance Seminar here

About the Survey

The Deloitte Motor Insurance survey was completed by representatives of all levels from 90% of motor insurance companies in Ireland.

About Deloitte

Deloitte Ireland is a world-class firm of expert business advisers, serving senior business leaders who are seeking to protect and create value in a complex, dynamic environment. Our objective is to help our clients succeed by anticipating tomorrow’s agenda with focused, insightful and fresh thinking borne out of our multidisciplinary strengths. We draw upon our specialist skills in audit, tax, consulting and financial advisory both within Ireland and across the Deloitte worldwide network.

What’s different about Deloitte is our people, who focus on building long-term relationships and are determined to deliver measurable value for our clients’ business. With over 1,000 people in Dublin, Cork and Limerick Deloitte is known as an employer of choice for our innovative human resources programmes and is dedicated to helping our clients and our people excel.

'Deloitte' refers to Deloitte & Touche and any associated partnerships and companies established under the laws of Ireland. Deloitte is the Irish member firm of Deloitte Touche Tohmatsu. For more information, please visit the Irish member firm’s website at www.deloitte.com/ie.