“Calmer waters” is how Geoff Carter (pictured), CEO of Sabre Insurance, sees personal lines market conditions today but he remains concerned that the market hasn’t put much price through in the first half of 2024.
Discussing Sabre’s “very strong” profit growth in H1 2024 with Insurance Business, he noted that its GWP increase of 26% overall – 36% in car – was delivered despite the slowing down in rate increases. “Our view is that claims inflation is still running at 10%,” he said. “So, if you’re not putting through 12% rate in the year, bad things are going to happen in the future.”
Sabre has equipped itself strongly to cover that claims inflation with the rate it’s putting through today, he said, and it’s still writing very healthy amounts of business. He expects this to look different to others operating on a different track when all the half-year results are in. Looking at the personal lines sector, claims inflation is continuing to run very hot, driven by high energy costs and labour pressures in the repair market.
Carter pinpointed the announcement by the Labour government yesterday regarding pay rewards for junior doctors as an example of how government decisions can impact the private sector. “That will knock through to insurance claims,” he said. “If you’re getting wage increases in the health service, that will knock through to private health providers which means costs will continue to go up.
“It’s interesting as the government would clearly like to see insurance premiums coming down but we need to take a look at all the input costs into that, of which this is one. Because there’s still quite a lot of labour rate deficit in the repair market, inflating costs in the health service service. So, there are still lots of things driving premiums up which is going to lead to some really interesting conversations with the government. Because everyone would like premiums to come down but the input costs have to come down to allow that to happen.”
For brokers operating in the market today, Carter’s advice is to accept that premiums are going to increase and to focus on communicating pricing changes with customers. The good news is that the market should not be in the same position as last year, he said, where people were seeing 35-40% premium increases. That was a one-off rate correction, and brokers should expect to be communicating 8-15% pricing increases through in H2 of the year, which should be a lot easier both to manage and explain.
“There’s a lot of change in the broker market at the moment,” he said. “The Markerstudy deal with Atlanta is now completed and [Markerstudy] bought Hughes yesterday in Northern Ireland. So, there’s lots of consolidation going on still. But I do think we’re now out of that big pricing surge period and hopefully, brokers will find it easier to manage their books and retain customers going forward.”
Offering his view on the market, Carter noted that there are some “rational”, profitable insurers – with Sabre among them – who are being slightly cautious around inflation and focusing on maintaining the right margins. The risk you have, he said, is whether some insurers will go for growth through irrational pricing, and its knock-on impact on other insurers in the market. That’s the behaviour that can turn the cycle downwards so it will be interesting to see how much focus insurers put on margin versus volume in the second half of the year as the market responds to continuing claims inflation.
For Sabre, continuing to cover claims inflation and pricing rationally remains top of the agenda. Three key initiatives underpin its growth strategy, he said, the first of which is the rollout of its next-generation pricing. As it stands, Sabre is only 1.5% of the market by premium and less than 1% by policy units. “So, we see a huge opportunity and a runway to expand our footprint in a controlled way over time.”
The insurer is also well set to expand its bike distribution next year, he said. Sabre “really likes” the motorcycle market and is happy with where rates stand now, and is looking to expand its distribution in early 2025. The third piece is around improving its efficiency in relation to its direct book, as it looks to support more customers in trading with Sabre online, rather than having to phone in.
As to what a great 2024 looks like for Carter and his team, he said: “I think we will continue to grow premium on a weekly basis, not as much as we have done over the last 10-12 months because the market’s not much putting that much rate through. We’re going to continue to expand our margin, we should be back within our combined operating ratio of 75-80% and then pay a pretty chunky dividend at the full-year to investors.”
