Motor insurers: must gear up for recessionary dangers
Published:25-March-2009
By Datamonitor staff writer
According to recent surveys, the number of uninsured drivers in the UK has risen, and many in the industry are preparing for an increase in fraud claims as well. Insurers will have to be proactive in dealing with these threats to their profitability, as it is likely that the recession will continue to increase the number of uninsured drivers and fraudsters for some time.
A rise in uninsured driving and fraudulent claims is placing increasing pressure on UK insurers.
The number of motorists driving their own or others' cars uninsured has shown a four percentage point increase over the 2008 level, according to a recent survey by Moneysupermarket.com. This trend is consistent with the view that more consumers will drive uninsured as their financial situation deteriorates due to the recession. According to the Motor Insurers Bureau, uninsured driving already represents a significant cost to motor insurers as the overall cost of uninsured motoring was more than GBP500m in 2007.
Motor insurance fraud and uninsured driving are recurring issues for the motor insurance industry, but the recession is likely to cause an increase in the incidence of such claims as consumers under strained circumstances try to cash in with inflated motor claims. According to a poll taken of delegates at the Motor Claims Management Conference in February 2009, 47% thought the recession will result in a major increase in motor claims fraud and a further 25% said it had already caused such an increase, while a survey conducted by Insurance Age found that 75% of industry experts expected to see fraud rise in 2009.
In 2007, according to the Association of British Insurers, insurers' exposure to fraudulent motor claims was estimated at GBP260m and had risen by 70% over the last three years, even while the economy had grown. The already substantial size of the fraud problem means that further increases in the incidence of fraud, brought about by the recession, will put significant upward pressure on insurers' claims bills.
With the economy predicted to continue contracting and the unemployment level forecast to rise from the current two million to a potential peak of 3.3m in 2010 or 2011, more consumers will be tempted to cut their expenditures or boost their income by driving uninsured or through fraudulent claims. Datamonitor therefore feels that insurers must be prepared for this trend to continue, and investments such as Zenith Insurance's recent creation of an in-house anti-fraud team and Allianz's expansion of its technical and operational fraud teams will be required to prevent the recession from increasing claims costs substantially and, as a result, reducing profits.
