UK non-life insurers to raise premiums to offset claims inflation
UK non-life insurers are set to increase motor and household premiums to counteract claims inflation, Fitch Ratings said on Aug. 24.
Motor insurers are expected to raise premiums to offset rising claims costs in the absence of further changes to the Ogden discount rate, according to a report titled ‘UK Non-Life Company Market Insurance – Mid-Year Update’. The declining trend in household premiums is also likely to reverse as insurers take pricing actions to counteract increasing claims inflation, according to Fitch.
Motor insurance premiums rose significantly in the first half of 2017, reflecting the substantially higher costs of bodily injury claims as a result of the Ogden discount rate change. In the absence of further Ogden discount rate reforms, Fitch believes premiums will continue to rise, to reflect higher claims inflation and prospective higher prices of reinsurance protection, as most insurers will renew their motor excess of loss reinsurance in January 2018.
Increasing claims inflation, Flood Re levies and a further rise in the insurance premium tax are likely to be the reasons behind the 2 percent average household premium increase in the second quarter of 2017 over the previous quarter, after several consecutive quarters of premium declines, Fitch said. A number of UK insurers reported continued increases in costs of escape of water claims, which mainly relate to flooding caused by water pipes, washing machines, drains etc. Fitch believes this trend is likely to continue due to the increasing proportion of homes being fitted with central heating and other appliances while home contents values are on the rise.
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