Premiums for UK non-life insurance products could be set to rise on the back of rising claims inflation and higher reinsurance costs, according to rating agency Fitch.
Fitch said that it expects UK non-life insurers will increase motor premiums even further to offset rising claims costs and also higher reinsurance costs that are expected at the January 2018 renewal.
Additionally, a declining trend seen in household insurance premiums is likely to reverse as insurers increase their rates in order to counteract increasing claims inflation.
Motor insurance premiums have already risen significantly, reflecting the impact of higher bodily injury claim costs due to the Ogden discount rate change. With no sign of further reforms to the Ogden discount rate as yet,
Fitch expects insurers will push through further price rises, to reflect higher claims inflation and also the prospects of higher reinsurance prices, which are expected to be seen when insurers renew their motor excess of loss reinsurance in January 2018.
Claims inflation, Flood Re levies and a rising insurance premium tax are considered behind recent property insurance premium increases.
Fitch says that some UK insurers have reported continued claims inflation, due to escape of water claims largely related to flooding from water pipes, washing machines, drains etc. Fitch says this trend is likely to continue, with homes increasingly seeing items installed that can result in flooding while at the same time home contents values are increasing.
Rising premiums might be welcomed by a sector that has seen higher combined ratios of late.
