The UK motor insurance market’s net combined ratio dropped to 106% last year, which was an improvement from the 120% recorded in 2010.

Business advisory firm Deloitte presented the figures last week at its annual motor insurance seminar, saying the result is the biggest single-year improvement in profitability recorded by the industry.

The market’s claims ratio was 79% and the expense ratio was 27%.

Deloitte insurance partner James Rakow says gross written premium increased 10% but this was not enough to return the market to profitability.

“At an industry level, the underwriting losses were close to £600 million ($955 million) in 2011,” he said.

“Investment returns will have helped to alleviate underwriting losses. With total premiums now reaching £14 billion ($22.3 billion) a year, the motor insurance market is still attractive for insurers who are successful at attracting and retaining profitable customers or selling add-ons to basic motor cover.”

Mr Rakow says consumers are expected to face further premium increases this year.

“We expect improved results to be delivered by motor insurers in 2012 and we could see an underwriting profit for the industry. The last time this was seen was in 1994.”

IAG, which owns the UK’s fifth-largest motor insurer, has effectively put its UK division on the market, insuranceNEWS.com.au reported last week.