The cost of injury claims in the United Kingdom car insurance market has recently grown by nearly 30 percent annually, further stressing expense ratios and challenging many insurers' future profitability, according to Towers Watson.

Towers Watson asserted that competitive pressures and current low investment returns are leaving insurers in urgent need of finding a new competitive edge.

Ryan Warren, who leads Towers Watson's pricing and product management practice across EMEA, said insurers were able to write profitable business only a decade ago by employing strong business strategies around the strict targeting of niche markets and effective distribution channels.

Now, however, they are forced to compete on cost across a wider cross section of the market because of the significant changes in customers' shopping habits, he said.

"This market has now become even more competitive than the airline industry," he noted.

The UK motor insurance market, according to Towers Watson, continues on average to generate losses, with more claims being paid out than premiums received and with tough conditions expected to endure unless consolidation takes place or players exit the market.

The company said that in spite of this inhospitable environment, opportunities remain for insurers that are prepared to move beyond pricing and invest in evolving their business.

"The jump in injury claims specifically has been met with widespread concern across a sector already under intense pressure to innovate, while carriers push to respond quickly to consumer needs," said George Maher, Towers Watson senior consultant.

"In response," he added, "some insurers have acted quicker and more effectively by thinking laterally to improve their business process, reflecting a company culture highly correlated with performance."

According to Towers Watson, the most critical challenge for personal lines insurers is to quickly and cost-effectively identify their customers' unique and changing needs and to deliver optimal solutions to meet those needs by leveraging their strategic strengths.

"Carriers that sit on the sidelines to see what happens next will rapidly find themselves at a serious disadvantage," Mr. Warren said. "However, insurers that embrace a learning and intuitive culture in anticipation of change are more likely to prosper. Being technically the strongest data cruncher no longer guarantees profits in an unprofitable market."

Towers Watson suggested that an exclusive dependence on pricing to compete is a major reason some insurers are struggling for profitability, as is delaying investment in next-generation strategies such as telematics--the technology of sending, receiving and storing information via telecommunication devices in vehicles.