I have on occasion been guilty of pointing to the virtually unregulated U.K. auto insurance market as an example of how the free market can drive innovation and vitality in the insurance market place.
However, it does seem that an important reality check is in order, as evidenced by this article from Forbes:
The UK motor insurance industry made an underwriting loss of 200 mln stg in 2005, more than double the previous year’s 70 mln stg, according to new research from accountants Deloitte.
Deloitte said the deterioration was driven by a 320 mln stg loss on insuring private motorists, which outweighed a 120 mln stg profit on commercial vehicle insurance.
The accountancy firm added that the loss would have been bigger still had it not been for a 600 mln stg contribution from so-called reserve releases — cash set aside to cover claims in previous years but never used.
