A RISING tide of no-win no-fee personal injury claims has overshadowed a record half-year for sales and profits at car insurer Admiral.
The group, which owns Diamond, elephant.co.uk and Confused.com, grew turnover 53% to £1.1bn in the six months to June 30 after the number of vehicles on its books jumped by a third to 3.15 million and its premiums rose by around 11%.
However, shares tumbled more than 8% as investors focused on a sharp rise in claim costs while the company signalled some relief for motorists amid signs the recent surge in premiums may ease.
Premiums have soared after a rise in fraudulent cash-for-crash claims, rising by about 30% on average across the market in 2010, but Admiral said recent surveys had indicated a slowdown in the second quarter as the cycle starts to turn.
The increased claims payouts clipped profits growth to 27% at £160.6m, well below the growth in revenues.
As a proportion of premiums, claims jumped from 67.8% to 77.5%, while the combined ratio, which includes expenses, rose from 89.3% to 94.2%. The lower the figure the higher the profit.
Chief executive Henry Engelhardt said that the company was “not immune“ to the rising level of no-win no-fee injury claims and their related costs.
“As one of the lowest cost providers in a commoditised market we are well-placed for a future, which is shaping up to be the survival of the fittest,” he added.