Bloomberg Intelligence (BI) has sounded the alarm over the spiking rates of personal lines in the UK and Ireland – exceeding other countries in Europe – which, according to experts, spell ‘disaster’ in the local insurance markets.
This statement was made after two insurance giants, Allianz and AXA, increased their personal lines pricing in Ireland and the UK by 51.7% and 35.3% respectively, in the first quarter of the year. Allianz has decided to increase its rates in an attempt to improve the performance of its motor insurance book, says BI.
“Personal-lines pricing is rising faster than commercial lines, based on AXA figures, as insurers play catch up with the cumulative effects of inflation. Yet Europe-wide price increases have diverged. Allianz raised rates in the UK by 18.4% through 2023 before boosting Q1 pricing by 35.3%. AXA’s UK and Ireland prices jumped 31.5% for retail lines in 2023, then it pushed them up a whopping 51.7% in 1Q. The magnitude of such rate increases dwarfs the rises in Germany, France, Italy, and Spain,” said BI senior insurance analyst Charles Graham.
Nevertheless, Allianz UK’s decision to increase their prices resulted in profitability, according to BI. The BI report said that Allianz’s 35.3% Q1 price jump in the UK, building on an 18.4% price gain, on average through 2023, has helped its underwriting profitable there.
However, compared to Germany and France, Allianz had a 95.5% combined ratio in the first quarter of this year, according to the BI report, while the two countries had only 93% and 90.3%, respectively. The report furthered that since the beginning of 2022, the combined ratio has averaged 97.4%, with France at 94.8% and Germany at 91.9%. It has only exceeded 100% in one quarter.
Moreover, BI also noted that rate increases in France and Germany have been much lower compared to the UK, notwithstanding the same inflationary pressures. In France, prices have increased by 8.2% in 2023 and 9.6% in Q1 this year, while Germany recorded a 6.6% spike in prices and only 7.6% in Q1.
Allianz also has doubled its size in the UK with the 100% acquisition of Liverpool Victoria and L&G’s general insurance in 2020, the BI report stated. Allianz also has become the country’s leading pet insurer through its Pet Plan.
Meanwhile, inflation remains the greatest roadblock among European insurers, Graham noted.
“The challenge for European insurers remains how to keep pricing ahead of inflation. While commercial policies may include automatic indexation on long-term contracts to reflect inflation trends, the treatment of inflation for personal-lines pricing and particularly for motor varies by geographic region and is often dependent on individual insurers adjusting pricing in competitive markets,” he said.
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