Claims inflation will push non-life insurers in the UK to keep increasing premiums, according to Fitch Ratings.
“In the absence of further Ogden discount rate reforms, we believe 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,” said the credit rating agency in a press release.
The government’s response to the consultation over the hotly contested Ogden rate was supposed to be announced on August 03, but that has been delayed until further notice. As such, Fitch noted a significant rise in motor insurance premiums in the first half of 2017 – attributed to the substantially higher costs of bodily injury claims following last February’s Ogden rate adjustment from 2.5% to -0.75%.
As for household premiums, Fitch said insurers are taking pricing actions in response to rising claims inflation. It also cited Flood Re levies and a further increase in IPT (insurance premium tax) as additional factors likely to have caused the 2% average household premium increase in the second quarter compared to the first three months.
According to Consumer Intelligence research,
home insurance premiums went up at more than double the rate of inflation in the year ending July. As reported, average premiums for the period rose 7% to £131 – with Brexit identified as another contributor.
Fitch also said several UK insurers reported continued increases in costs of escape of water claims, and it forecasts the trend to persist “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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