Squabbling begins over motor rate pricing

Equity Insurance Group has gingerly made its concession to the need for motor rate increases by announcing it will increase rates by 5% over the course of 2007. However, rival Groupama has already criticised this approach as inadequate, on the basis that claims inflation is running at 6%.

Andrew Goldby, motor underwriting director at Groupama, warned that the industry is heading for a painful combined operating ratio of 109% in 2006, with a similar COR trailing into 2007 unless rates are increased substantially. However, he was tight-lipped on the precise percentage increase Groupama was considering, saying only that: "We are planning on moving our rates up by more than 5%."

Keith Charlton, joint active underwriter for Equity, told Professional Broking: "We need to increase premium rates for motor insurance. We intend to increase rates by 5% and we hope the market will follow."

Norwich Union recently made the boldest motor rate increases of 2006 but the market is still waiting for a reaction from the Royal Bank of Scotland - the main player in the motor market.

Chris Hill, managing director of Highway, reacted: "I am very happy that they (Equity) will be following our lead. We have been increasing rates through the second half of 2006, with the intention of carrying around 5% next year ourselves. The market result for 2006 is expected to be worse than last year, and the outlook for 2007 is not much better. A few may try to defy gravity and not move their rates - good luck to them but we'll be putting ours up."