Esure has become the latest car insurer to join the industry’s PR chorus aimed at trying to blame rising motor premium prices on ‘fraud’ and ‘compensation culture’.
The insurer of nearly 1.5 million motorists sent out a press release last week saying it had made a profit of only £3.3m from ‘motor underwriting’ because of an increase in claims.
This was at odds, however, with the more bullish statement it made to the stock market telling shareholders that they would be getting an £17.5m interim dividend because the group had made an ‘underlying profit’ for the first half of the year of £46.5m.
Esure, which derived 85% of its £275.5m half-year revenue from car insurance, said it had seen a 7% rise in claim ‘notifications’ in June compared to the same month last year.
“It tells you everything that this didn’t stop the insurer deciding to pay out a £17.5m dividend,” said Tom Jones, head of policy at Thompsons Solicitors. “The truth is that they were already increasing premium prices in line with a trend across the market that has long been predicted by industry bosses.
“The reason for their underwriting profit being low is that, on this occasion, they have chosen to release less from their accident reserves at the half year than they did last year.
“Insurers can only estimate how much they need in reserve to cover the possible value of claims and for the last few years, it seems, Esure has been overestimating claims and then releasing large sums from its reserves (to pay dividends to shareholders) when those claims haven’t materialised.
“This windfall of reserves releases has now been reduced from £46.6m to £36.2m – still a tidy sum, but the drop hits motor underwriting profit figure at this half year.
“There is, however, no reason to suppose Esure’s latest estimate of the likely cost of claims is any more accurate than its previous ones. It is quite possible that we will see reserves releases increase again.
“Only time will tell, but pleading a crisis when things look pretty rosy if you are a shareholder smacks of yet another PR ploy from an insurance industry desperate to blame accident victims in order to keep a compliant government reducing access to justice.”