A return to madness or just a blip?...

With news this week that the Confused.com/Tower Watson Car Insurance Price Index recorded a 3.3% reduction in UK motor insurance premiums in Q1, the upward trend of the past four years appears to now be moving in the opposite (wrong) direction. Is this a blip or the start of a new trend?

We have all seen insurance prices up by 32% over the past 24 months and by over 50% in the past 36 months. These increases were badly needed in a sector of the market that has recorded hugh losses in the past few years. So what has changed to prompt this Q1 rate decline? Are we to believe that insurers have now addressed the profitability issues caused by spiraling bodily injury claims? I'm not convinced. Fraud is still a major issue, claims inflation has not gone away, volatility in the market remains and there is still uncertainty as to the impact of the pending EU ruling outlawing discrimination on premiums on the basis of gender. 

It would be a shame, given the good progress that the UK motor insurance market has made to return to profitability (or at least stem the trend in historic losses), that the cyclical nature of the business takes hold with insurers again chasing market share ahead of profitability. If this is the case, then there is a need to change the model as the current one is plainly not working. 

The Q2 Price Index numbers will be very telling...