With the cost of the recent floods in the UK having mounted to close to £4 billion, the motor insurance business will likely also see an increase, experts have estimated.
According to actuarial firm EMB, motor premiums may rise as much as ten per cent as insurers - who paid out £106 last year for every £100 they received in premiums - often lose money on driving insurance.
This shortfall is often subsidised by gains from
home insurance, but these will likely take a hit after the large scale damage caused by the July floods, forcing insurers to drive premiums higher.
EMB based its research on the Financial Services Authority (FSA) annual review of insurers' returns.
"There's clear evidence that they've been using some of these profits to cross-subsidise their motor book. This will stop in the light of the heavy claims they're getting from the floods," said EMB senior consultant Paul Moorshead to Reuters.
Until now, competition in the
car insurance market had kept prices down despite rising repair costs and injury claims.
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