The ‘Credit Crunch’ Gets a Grip on Car Repair Costs By Sheila Challiner At Isnare.com Ezine Articles

Premiums are going through the roof as accident repair bills get higher and higher. Insurers are forecasting that premiums are likely to rise faster than claims, as explained below.

Motoring costs are being hit from all angles and insurance company Admiral, who have in excess of 1.5 million clients, say it is virtually inevitable that premiums are going to rise faster than claims; something that has not happened for 7 years. During the first half year of 2008, their premiums were up by 3%, however, this is only about half of the 5/6% being seem more and more across the whole industry.

This will hit hard. According to the AA fully comprehensive cover is as high as £700 on average which is nearly 6% higher than 12 months ago and soaring well over the rate of inflation.

Cars are now more sophisticated technically and so repair costs are higher; this is part of the blame for the increase in premiums, but also, a marked increase in the number of personal injury (‘ambulance-chasing’) claims is also pushing those premiums. This, on top of general fuel costs of motoring, is making driving to some people almost prohibitive.

In the last 5 or 6 years premiums have been almost stationary as the insurers have wanted to keep a lid on prices to get more people on-board. So they have used their reserves rather than pass the cost on to the client despite a marked rise since April. It has been very effective as their cars insured figures have risen to 1.48 million; this is an increase of more than 11%.

Pre-tax profits increased by 16% and therefore pushed shares up by 6% during the first 6 months of the year. The total profit went up to £100.3 million, well above the projected £95.5 million.

Admiral’s chief operating officer, David Stevens said: 'A car for most people is a necessity, not a luxury, so demand is not going to fall off a cliff as it will in other sectors.' And, he says, that other motoring costs, higher tax and expensive petrol is taking its toll and people are using their vehicles less. This is having a knock on affect as fewer claims are being made.

Confused.com, Admiral’s price comparison website, is doing battle with strong competition so they are being cautious. Although a record number of quotes have been given and revenues have grown, there has been a drop in operating profits, (from 19.7 million to 15.6 million), as a result of the group spending more on marketing whilst trying to compete with their rivals and defend its reputation.

However, as a consequence of the groups’ strong results it means that over 2,300 of their staff employed over this period are set to get in excess of £3 million in free shares which will be around £1,500 per person.

But the overall strength of the results meant that more than 2,300 staff with the group over the period will gain more than £3 million in free shares - around £1,500 each.

Andrew Crean, Citigroup analyst said: 'The shares have trod water for 18 months waiting for a cycle turn to provide greater earnings impetus - this is now at hand.'

Published At: Isnare Free Articles Directory http://www.isnare.com
Permanent Link: http://www.isnare.com/?aid=342255&ca=Finances

Important Notice DISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.