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While much has been made of rising prices in the insurance industry, IAG CEO and managing director Peter Harmer has said his firm will look to invest in mitigation to reduce client risks.
Harmer said that he expects prices to continue to rise in the commercial insurance sector in 2018 but that investments will be made too.
“If you look at our commercial business, our underwriting margin still needs to increase,” Harmer stated. “Pricing still has a little way to go but the issue won’t only be dealt with by putting pricing up. There will be a lot more investment in encouraging customers to understand how they can reduce risks within their own business to contain premium increases.”
Over the first half of the year Harmer said the industry had seen 10-15% increases but pricing still remains lower than where it sat in 2010-11.
“We are just starting to get back to some sort of pricing equilibrium now,” he said.
By taking a longer view of the current market, property insurance has been “underpriced” for the last five to 10 years – particularly in the large corporate space, he explained. With that in mind, property is expected to see the bulk of the increases, especially those with bad loss histories, but SME clients can expect “more modest” increases.
In addition, Harmer noted that, in comparison to other pricing cycles, the current transition has not been brought about by a major natural disaster which has meant rises have taken longer to take hold.
“The feedback and what we are seeing in this turn in the market cycle, more so than any of the others I have seen in my nearly 40 years in the industry, is this has taken a lot longer and it has been a lot more fragile in the way in which it started, largely because it wasn’t initiated by a large catastrophic event that sucked capital out of the industry,” Harmer said.
“Therefore I feel this will be more progressive, more sustainable and more easily digestible by insurance buyers.”
