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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n Motor insurers \u2014 and their investors \u2014 have been pondering existential questions recently: with the impending arrival of self-driving vehicles, will car insurance even exist 20 years from now? Recent updates in the UK, however, were a reminder that there is a more mundane present-day problem: making money from cars that are currently on the road.\u00a0<\/p>\n FTSE 100 group Admiral was one of the first insurers to try forecasting the spread of self-driving cars over the next decade, predicting they would account for only about 4 per cent of the UK market by 2035. Amanda Blanc, chief of Admiral\u2019s larger rival Aviva, said she didn\u2019t expect widespread adoption until 2040.<\/p>\n That is good news for insurers who make money from protecting humans from the cost of their driving mishaps. But the business, even if it has a few decades of life left in it, isn\u2019t going so well. Scale helps the biggest players, but collectively the sector\u2019s core underwriting business has lost money for three of the past four years.<\/p>\n The UK\u2019s 100-odd motor insurers paid \u00a31.01 in claims and expenses for every \u00a31 in customer premiums they received last year, according to EY. In industry jargon, that is a \u201cnet combined ratio\u201d of 101 per cent. Income from investments and other business lines may keep insurers in the black overall, but EY expects the ratio to worsen to 111 per cent this year.<\/p>\n That might sound shocking to outsiders whose main exposure to the sector has been watching their own premiums soar. The average annual cost of comprehensive motor insurance rose more than 40 per cent between 2021 and 2024, according to the Association of British Insurers, before falling back 9 per cent last year.\u00a0<\/p>\n The problem is, insurers\u2019 costs accelerated even faster, thanks to a combination of skills shortages, supply chain issues and more complicated modern cars. Regulation designed to stop them ripping off loyal customers didn\u2019t help, though they presumably expect little sympathy on that point. Conflict in the Middle East could add further inflationary pressures.<\/p>\n Admiral and Aviva were clear that the main response to this will be more price increases. It takes time for them to feed through to insurers\u2019 bottom line, however \u2014 hence EY\u2019s pessimistic industry forecast for 2026, and analyst forecasts for a 7 per cent fall in pre-tax profit at Admiral\u2019s motor division, according to Visible Alpha.<\/p>\n There\u2019s not much insurers can do about global conflict, or the popularity of cars full of over-engineered gadgets. One lever they can pull is pursuing economies of scale through consolidation.<\/p>\n The UK market is much more concentrated than it was after Aviva\u2019s \u00a33.6bn takeover of Direct Line and Ageas\u2019 \u00a31.3bn deal for Esure, but there is still a long tail of dozens of smaller businesses around. Many will have been driven off the road by the time autonomous vehicles take over.<\/p>\n [email\u00a0protected]<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. Motor insurers \u2014 and their investors \u2014 have been pondering existential questions recently: with the impending arrival of self-driving vehicles, will car insurance even exist 20 years from now? Recent updates in the UK, however,<\/p>\n","protected":false},"author":1,"featured_media":46156,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[3473,1495,4278],"class_list":{"0":"post-46155","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-bills","9":"tag-car","10":"tag-insurance"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/46155","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=46155"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/46155\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/46156"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=46155"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=46155"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=46155"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}