Aggregator websites will account for nearly half of all personal motor policies sold in the UK by 2014, according to a new report by Ernst & Young and the Chartered Insurance Institute (CII).

The report, Bringing profitability back from the brink of extinction, collates information from 46 in-depth interviews with industry leaders and 712 online questionnaires completed by underwriting staff in October and December 2010, representing 70% of the primary personal motor insurance market.

It details the decline of profitability in the UK retail motor market, which has most recently recorded an unadjusted net combined ratio of 122.7%.

Imran Ahmed, a partner in Ernst & Young’s insurance performance improvement practice, says aggregators such as price comparison websites will continue to benefit from the ongoing desire of UK consumers to reduce their spending.

“Aggregators will continue to grow and we expect their market share to reach about 49% by 2014,” he said. “There is no question that the advent of aggregators has done a great deal to educate personal motor customers about price and choice of provider.”

He says aggregators have brought about a “major shift in patterns of distribution” for motor insurance and that the household and SME markets may be next to undergo dramatic distribution change.

“Going forward, we see household and SME insurance as ripe for the kind of changes that have affected motor.”

Mr Ahmed says the findings indicate that existing motor market players will need to find new models in order to generate profits.

Training of staff and IT systems also need to be addressed, as almost 80% of respondents to an associated survey identified better risk pricing as the single most critical initiative likely to improve profitability over the coming three years.

Almost half said weakness in pricing skills was the greatest human barrier to maintaining or enhancing personal motor profitability.

“In order to succeed in this market going forward, insurer’s capabilities need to change,” Mr Ahmed said. “In particular, insurers need to be investing far more in their people and technology to keep up with the demands of rapidly shifting distribution channels.”