Contrary to a number of early predictions of a downturn in the motor insurance market, analysis of FSA returns by Deloitte shows the industry is well on course to declare a better result in 2004 than 2003*.

However, the headline result disguises a downturn in underlying performance. In 2004 many companies chose to release money from their prior year reserves thereby allowing them to continue to defer or defy a visible down turn in the cycle for one more year.

In contrast with previous market cycles, however, premiums have also held up better for insurers during 2004 and 2005 than many predicted. There is still no sign of the market level rate cuts seen during the last downturn in the cycle, but tactical price reductions by insurers means that the consumer can still get a better deal by shopping around.

Commenting on the FSA performance data, Catherine Barton, a partner at Deloitte said: “The 2004 results for many companies look set to be the best in the last decade, and will take the industry by surprise as most analysts were expecting a modest down-turn in the market.

“When the 2003 results for the motor insurance market were declared last year, the market was not giving clear signals about where it was going next, and in making our predictions of whether the market would turn in 2004, we declared it ‘too close to call’. This year’s market level results are reflecting a range of competing influences on market performance, but we continue to believe the market will remain stable over the next year.”

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About Deloitte
Deloitte & Touche LLP is the UK's fastest growing major business advisory firm.

The firm is based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.