(Adds quote, background on prices, loss ratio forecast)
Oct 25 (Reuters) - Hastings Group said on Friday the insurer’s annual loss ratio may move above its target range if the cost of claims continue to increase in a highly competitive UK motor insurance sector, that is also facing a regulatory clampdown on prices.
The company said claims inflation increased in the third quarter due to a rise in third-party credit hire, repair and mid-range bodily injury costs.
"The market has remained competitive, with market premiums continuing to lag claims inflation, and the Group's new business competitiveness has therefore fallen," Hastings said. (reut.rs/2JidB31)
If that continues, the company’s 2019 loss ratio, the amount an insurer spends on claims compared to how much it earns on premiums, may move above a target range of 75%-79%.
The company’s shares fell over 4% and were the biggest losers among London’s mid-cap stocks.
While the number of accidents in the UK have remained stable, the cost of settling claims has been on the rise as newer cars outfitted with high-tech safety and entertainment gadgets are more expensive to fix.
UK motor insurers also suffered a steep fall in share prices earlier this month when Britain’s markets watchdog said they could avoid mandatory pricing restrictions if they voluntarily stop penalising loyal customers.
Hastings said its current business model should leave the company well positioned to respond to the regulator’s final recommendations.
The company, which vies for market share with Direct Line Insurance Group Plc and Admiral Group Plc, said gross written premiums rose to 753.1 million pounds ($967.66 million) in the nine months ended Sept. 30.
$1 = 0.7783 pounds Reporting by Uday Sampath Kumar and Muvija M in Bengaluru; Editing by Shounak Dasgupta