2017 was a tough year overall for the insurance market, and the home insurance space was certainly no exception. This year, we can expect the picture to remain similarly rocky, warns consultancy EY.
The home insurance market experienced “an extremely challenging 2017,” thanks to falling rates and rising costs which continued to bite, according to Tony Sault, UK general insurance leader for EY.
“Unfortunately, we foresee little on the horizon that will alleviate these pressures. We think 2018 will be equally demanding, and that this is likely to be the case even if the UK doesn’t experience extreme weather conditions,” he went on to say.
Looking past 2018, the home insurance space could well see its woes stretch out for several years, Sault said, describing the industry as one “in transition.”
“While there is evidence of the green shoots of new business, traditional players are being challenged by new technology and are having to invest in digital capability in order to keep up,” he said. “These changes have combined to push down premiums, while at the same time rising claims and expensive inflation have created a double whammy.”
Combined, these issues have had a negative impact on profits – with more deterioration expected to come.
This year, housing transactions are predicted to rise by 4% – less than half the average rate seen in the last four years. With repeated recent increases in Insurance Premium Tax, which now stands at 12%, affordability and demand for insurance are also key issues facing the larger insurance industry.
“Home insurers are expected to achieve a barely profitable 99% NCR in 2017, assuming the year ends with no major weather events, with a further deterioration forecast for 2018 of 101.7% NCR,” Sault said.
In November, EY also warned that
home insurance claims have become increasingly expensive thanks to the UK’s penchant for home improvements. Fixing leaks in particular has become far more expensive as a result of wood floors, multiple light fittings, and en-suites. According to Sault, the average cost of a leak claim had increased from £1,750 in 2013 to more than £2,500 last year.
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