Insurance premiums to rise further

FURTHER increases in insurance premiums are still needed despite last year's hefty rises, the Association of British Insurers warned yesterday.

The association, representing 450 companies transacting business in the UK, said: 'Results did improve last year but we still lost money.'

Ian Rushton, chairman of the association, said: 'Significant rate increases have been introduced and their full effect will come through to companies over this year.

'Further rate increases are likely to be required but opinions vary from insurer to insurer as to their size, depending on their own results.'

Even though the main British insurance companies are protected by a semi-monopoly in their local market the ABI pointed out that household and contents insurance costs for policyholders had risen by 15-20 per cent last year. Costs for policyholders could go higher this year.

'Insurance companies have taken action to put the industry back on the right track, but we still have some way to go to return to full profitability with an adequate return on capital employed,' Mr Rushton said.

'Our underwriting loss was 15 per cent of premiums. This is unacceptable, as it means that for every pounds 1 of premiums we collected pounds 1.15 was paid out in claims and expenses.'

Mr Rushton warned that competition remained strong, not only in the UK but in many of the British companies' overseas markets.

'Over-capacity has kept premium increases down, with volumes also affected by the continuing recession around the world,' he said.