Ever since we wrote our first motor policy in 1904, Lloyd’s has had a significant presence in the UK and, more recently, in overseas motor markets. As a relatively non–volatile cl1ass of business, motor business has long been regarded as an effective hedge against higher risk classes of business. So, in the past, many Lloyd’s managing agencies had a motor syndicate in the group, alongside marine, aviation and other specialist syndicates. As the overall number of managing agencies and syndicates has shrunk, the number of stand–alone motor syndicates has fallen and today only three remain.

Accelerating competitive pressure

From a peak in 2001, gross premium income from UK motor business in 2004 fell, reflecting the reduced number of trading syndicates in the market and the continuing gradual erosion of pricing. Competition is always intense in motor business and now includes large, consumer–facing organisations such as supermarkets and, most recently, the Post Office, which have enormous ’semi–captive’ markets.

Naturally, these types of competitors are focusing on the private motorist and this is part of the reason why Lloyd’s motor underwriters have in many cases moved away from the standard private vehicle sector (now representing less than 50% of motor income) in favour of non–standard, fleet and commercial vehicles. In these areas, bespoke underwriting skills and claims handling services, experience and expertise remain more important than for high volume, homogenous risks.

Rather than focusing solely on price, Lloyd’s is more interested in developing a good rapport and understanding with its policyholders which in turn leads to continuity and, in the long term, a better overall level of profit margin.

Current trading conditions are becoming increasingly difficult as revealed in the accident year combined ratio climbing above the 100% mark. However, prudent reserving in prior years has allowed for releases to be made thus bringing the overall underwriting result back into profit.

High performance underwriting skills

Similarly in the private motor market, bespoke underwriting of individual risks is commonplace and much of the focus is on non–standard risks such as high value vehicles, vintage or collectors’ vehicles; drivers with convictions; or affinity groups. Again, these types of risk require experience and skill to underwrite effectively, and building a balanced book of business is complex. While the premiums available in writing the insurance of a high risk motorist, such as an individual with driving convictions, may initially appear high, the total loss of the vehicle, plus possible third party injuries, would quickly make these premiums seem modest.

Lloyd’s overseas motor book has historically not been profitable in recent years and managing agencies have taken steps to address this by reducing premiums written.