ABI’s Clark spells out home truths on rising premiums

Context is everything. As the Cambridge Dictionary puts it: “the situation within which something exists or happens, and that can explain it”.

Take our latest quarterly Property Insurance Premium Tracker, for example. The 15% increase in the average price paid for a combined home buildings and contents policy over the last year to £350 is, of course, not good news for households but then there is the wider context. 

During the year to 30 September, the value of domestic claim payouts rose by 17%, outstripping increases in the average price paid for combined buildings and contents insurance during the same period. 

A further EY study on the UK home insurance market shows that insurers paid out £1.22 for claims and expenses for every £1 of premium in 2022. 

During this period, the average payout for a flood claim was £16,905. For subsidence it was £11,515, and £3,111 for theft. 

This message that insurers, like many other businesses, are facing continued cost pressures which they have found increasingly challenging to absorb has gained traction with the media. Again, context is everything.

This does not include Storms Babet, Ciaran and Debi, which struck much of the UK at the end of October and into November. These three storms alone are expected to lead to payouts of at least £560m in damage to homes, businesses and vehicles. 

Nothing focuses the public consciousness on how vital insurance is quite like a bout of bad weather. We all know that events like this are the shop window for the industry and its response is how our sector is, quite rightly, judged by the public, politicians, and consumer groups alike.

We know that there are many factors that have put pressure on premiums, from surges in the number of claims to external inflationary cost pressures like the price of materials, labour and energy, or delays in accessing building materials or skilled tradespeople. 

The ABI/BCIS House Rebuilding Cost Index showed an annual increase of 18.7% in January 2023. These price pressures have been increasingly challenging to absorb.

Context

Highlighting claims costs to put premium rises into context is something we have done with our Motor Tracker. 

We all know that when it comes to paying for insurance, nothing grates with consumers quite like the cost of motor insurance, especially with the continuing intense spotlight on the rising costs of motor cover. 

That is why during 2023, we sought at every opportunity to highlight payouts and cost pressures. 

These include the highest quarterly payout of £2.54bn paid in the third quarter with a typical 16% jump in materials, and 15% increase in labour costs during the same period. 

This message that insurers, like many other businesses, are facing continued cost pressures which they have found increasingly challenging to absorb has gained traction with the media. Again, context is everything. 

Of course, the message of ‘look at how much the industry is paying out in claims’, for some is like praising a supermarket for selling food. 

This, of course, is what insurers are here to do but we must always be ready to highlight that the industry is doing what it says on the tin, and supporting customers just when they need it the most. 

After all, if we don’t say it then we cannot expect that anyone else will.