Motor insurance premiums look set to remain at their present low levels for another year and are likely to force a number of direct insurers out of the market, one of the UK's fastest-growing insurers predicted yesterday.
Independent Insurance, whose pre-tax profits rose 58 per cent to pounds 16m for the first half of 1995, said that by the middle of next year many insurers would want to push rates back up.
But even if they were able to do so, the effect of any premium rise would probably not be felt until at least 12 months from now, Independent's chief executive, Michael Bright, argued.
"Competition is intense and many of our competitors seem to have reacted by reducing rates without taking full account of the quality or source of business," Mr Bright said.
"It is our firm view that this will result in casualties within the market. Our policy remains uncompromising on standards of risk management and protection. Therefore we only work with those brokers and clients who look for a consistent approach and are prepared to take responsibility for controlling the risks they face."
On the motor side, Independent has reacted against soft rates by targeting niche, non-standard risks, such as vintage cars, the Stagecoach bus fleet and even the Williams Formula 1 racing team.
In June 1994 standard risks on its books - conventional car drivers - accounted for about half of business. By June this year, the ratio had shifted to less than a third.
The company predicted that by the end of the year, standard private car business would account for less than 3 per cent of its overall premium income.
A similar niche move has been taking place on the home insurance side, with the ratio of non-standard to standard shifting from 13 to 20 per cent in the 12 months to June this year.
Independent also confirmed its determination to stand by its policy of dealing through independent brokers. The company has agency agreements with more than 2,000 brokers nationwide, although it admitted most of its business came from just a few hundred.
Gross written premiums in the first half of 1995 grew by 53 per cent to pounds 200m. Despite intense competition, commercial business rose by 34 per cent to almost pounds 70m.
On the motor side, premiums fell 12 per cent to pounds 16m, while the underwriting profit dropped to pounds 100,000. The company's takeover of UK general business from the Dutch insurer Aegon allowed Independent to develop its affinity scheme business through specialist brokers, with gross premiums at pounds 13m.
Independent's results, which produced an interim dividend of 4.6p per share, lifted its share price 10p to 328p yesterday.
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