Motor insurers collide with wall of claims

LOSS prone motor insurers were this week again fastening their seat belts for another bumpy ride in a market made increasingly unprofitable by the rising costs of accident claims.

Guardian/PMPA, the State's biggest motor insurer, this week warned that it may be forced to raise motor premiums in six months time if claims continue to increase. Last September the group tagged on 5 per cent to motor policies and is now muttering of the need for another similar increase if circumstances warrant it.

A sharp increase in road accidents, higher hospital costs and higher personal injury costs - plus wafer thin margins in a competitive business - punctured pre-tax profits 38 per cent to £64.3 million last year. Operating profits tumbled from £59 million to £42 million. Underwriting business, profitable in 1995, slipped into reverse gear, returning losses of £4.9 million.

With interest rates low, investment income from Government stock remained static at £46 million.

Understandably, chief executive Gerard Healy bemoans the high cost burden on the industry and is urging the Government to "do everything possible" to reduce the level of road traffic accidents which would be reflected in insurers' premium charges.

The story of accident damage to the financial bodywork was much the same over at publicly-quoted Hibernian Group, which claims around 13 per cent of the motor insurance market. There, heavy losses on the motor side were offset by a strong improvement in the life assurance business. The group, although it does not anticipate having to increase motor premium rates this year, continues to monitor its claims experience.

Pre-tax profits were firmly in reverse gear, dropping from £49 million to £32 million, the figure coloured by a sharp decline in investment income, which tumbled from £22.6 million to £4.8 million.

Shareholders, however, move smoothly through the gears as Hibernian's "progressive " dividend policy tracks aggregated operating profits over a period of time. With net asset value per share improving 14 per cent, total annual dividends rise 13.5 per cent to 10.1p a share, a payment supporting boardroom contention that the results were "satisfactory" given the intensity of competition in an overcrowded market.