2020 is now set to have a Net Combined Ratio (NCR) of 93.8%, which is an improvement of 7.2% from 2019.
This improvement in profitability is primarily due to the impact of Covid-19 lockdowns and restrictions, however this will likely be temporary.
EY predicts that the NCR for 2021 will be a loss of 103.7%, due to underlying inflation and the impact of the FCA’s pricing review.
Tony Sault, market lead for UK General Insurance at EY, said: “The pandemic continues to have a major impact on people, economies and industries across the globe, including the insurance industry. Covid-19 related insurance pay-outs and business interruption present challenges for growth in the UK insurance sector as a whole.
“For motor insurers, however, the lockdowns have resulted in fewer cars on the road, meaning fewer accidents and fewer claims, so it’s not surprising that this will be reflected positively in their results.”
He added: “While the sector has passed back some of these benefits through premium reductions and refunds, for many insurers 2020’s results for motor will only go so far in offsetting COVID-19 losses on their other insurance lines.
“The lockdowns are masking some of the sector’s underlying cost challenges and next year motor insurers will face the same repair inflation trends they have been contending with for years.”