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UK motor insurance premiums to drop 6% in 2021 and 2022 due to Covid-19: EY

The loss will eventually save $38 per policy for insurance holders

The UK motor insurers are expected to face severe losses in 2021 and 2022 of about six percent due to Covid-19, according to EY, a professional services firm. The drop also means that insurance holders can save $38 per policy.

The UK motor insurance market is expected to make losses even though it reported its best profit in 2020 with a net combined ratio (NCR) of 90.3 percent. EY’s latest motor insurance results predict that the NCR of the sector will be 103.7 percent in 2021 and 112 percent in the year after that due to underlying inflation.

Rodney Bonnard, UK insurance leader at EY, told the media, “There has been a great deal of disruption over the past year, and the challenging market environment is set to continue, compounded by an increasingly soft market and a ramp-up of regulatory requirements.”

He further appreciated Fellow Chartered Accountant’s drive to offer fair value to customers and added that it would require insurers to carry out significant work and also bear the costs of implementing substantial changes in a limited time.

Necessary developments in innovation and digital transformation will be crucial for firms to face the challenges. The Covid-19 lockdowns principally drove the profitable NCR with a 20 percent fall in vehicle usage and a 28 percent drop in the number of motor claims. Premium rate cuts in the first quarter of 2021 dropped by seven percent. FCA’s pricing reforms will contribute to the short span of motor profitability despite the changes to whiplash injury claims effect from May. The car usage patterns have also shifted dramatically due to the changing Covid-19 national lockdowns.

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