(Reuters) - Steep car repair charges and “unscrupulous” behaviour from claims management companies are pushing up costs, contributing to a 42% slump in motor insurer Hastings’ 2019 earnings, its top boss said on Thursday.
Chief Executive Toby van de Meer said some claims management firms were encouraging customers to put in high claims.
“They are trying to pretend to be on their side so that they can do the repair at an inflated cost and charge either us or other insurance companies for that,” van de Meer told Reuters.
Cars were also getting more expensive to repair because they were fitted with more technology, he added.
The company, the first British motor insurer to post results, said adjusted operating profit dropped to 109.7 million pounds ($143 million) for the 12 months ended Dec. 31, from 190.6 million pounds.
“The earnings decline reflects the ongoing margin pressure from rising Motor repair cost inflation, but it also includes normal volatility around weather-related loss frequency and one-off large bodily injury claims,” Peel Hunt analysts wrote.
Hastings' shares were down 2.4% by 0923 GMT, broadly in line with a 2.2% slump in the wider midcap index .FTMC.
Gross written premiums edged up to 961.6 million pounds from 958.3 million pounds, while live customer policies grew by 5% to 2.9 million.
Hastings, whose policies are mostly underwritten by its Gibraltar-based insurer Advantage Insurance, said loss ratio, which is the amount it spends on claims compared to how much it earns on premiums, rose to 81.6% from 75%.
The insurer said it was targetting a 75%-79% loss ratio in the current year.
While the average cost of a motor insurance policy in Britain rose in 2019, competition and a change in the Ogden’s discount rate, which is used to calculate compensation for personal injuries, have hurt insurers.
The change means companies now have to make larger lump sum payments for such claims.
Hastings, which last month issued a profit warning due to rising claims costs, had said in the middle of 2019 that it would take an 8.4 million pound pre-tax charge due to the rate change.
“It’s not been an easy market environment, with lower prices and rising claims costs,” van der Meer said.
Reporting by Muvija M in Bengaluru; Editing by Patrick Graham and Edmund Blair