Home & motor rates to fall through 2021, says PwC – Reinsurance News
Analysts at PwC believe that home and motor insurance prices in the UK are likely to fall through 2021 in response to changing regulations and the ongoing COVID-19 pandemic.
In combination with growing levels of competition, PwC believes motor premiums could fall by 5-10% this year, while home insurance premiums could decrease by 4-8%.
For personal motor insurance, the current lockdown in the UK will continue the trend of lower than expected crashes on the road, PwC said, citing research that suggests road usage is 50% lower than normal so far this year.
Reforms to reduce the number and cost of road traffic accident whiplash claims are expected in May 2021, although this could be partially offset by the rising cost of vehicle repairs.
PwC also pointed to increasing competition in the home insurance market as many insurers look to expand into this space. The firm observed some reduction in claims due to the pandemic, although claims have grown again over the winter period due to cold weather repairs.
New regulation from the FCA is also expected in late 2021 or early 2022 that will require motor and home insurance prices to be the same for both new customers and those renewing. Traditionally, discounts on new business have been funded by increased pricing on renewal.
For commercial lines, PwC expects to see a continuation of the 5-20% rate increases experienced over H2 2020, depending on the line of business.
“For 2021, due to the economic impact of the pandemic and competition in the home and motor market, we are forecasting insurance premiums to drop by 5% – 10% for those who shop around for motor insurance and 4% – 8% for those who shop around for home insurance,” said Mohammad Khan, General Insurance Leader at PwC UK.
“Conversely, there may be greater reductions in renewal premiums for customers who have stayed with an insurer for a number of years. However, these estimates exclude the impact of the FCA reforms which may not be introduced in 2021.
Khan continued: “If the reforms on market pricing are introduced in 2021, the cost of the reduction in renewal premiums for customers who have stayed with an insurer for a number of years may be borne by those customers who use price comparison websites. This is because the renewal reduction will be funded by the abolition of discounts that are currently available to drivers who shop around each year.
“As we go deeper into 2021, the economic impact due to the pandemic, especially on smaller businesses, who may have been relying on furlough payments and government loans, will force SMEs to decide whether insurance is necessary,” he concluded.
“This will then no doubt have a significant impact on commercial insurers targeting this sector and the price rises they are able to achieve. For example, commercial insurers targeting the very small end of the commercial lines market may only achieve price rises of 0% – 10% in the latter half of 2021.”
Published at Fri, 19 Feb 2021 07:30:48 +0000