EY’s latest UK Home Results Analysis has unveiled that the UK home insurance market endured its most challenging year on record in 2022.
The report highlights a staggering Net Combined Ratio (NCR) of 122%, signaling significant losses for insurers. This bleak trend is expected to persist, with further losses anticipated for 2023 and 2024 due to ongoing market challenges.
The 2022 balance sheets of UK home insurers bore the brunt of major weather events, persistent high inflation, supply chain disruptions, and an uptick in claims frequency.
Moreover, the early 2022 General Insurance Pricing Practices (GIPP) reforms by the FCA played a pivotal role in reshaping premium levels, often falling short of the necessary adjustments to match inflation.
While premiums are on an upward trajectory, formidable hurdles persist. UK home insurers are projected to remain in the red, albeit with a slight improvement, with an NCR forecasted at 114% for 2023 and 104% in 2024.
Richard Reed, Head of UK General Insurance at EY, emphasised the unprecedented nature of 2022’s losses, which differed from previous years primarily driven by adverse weather.
He expressed cautious optimism for 2023 due to favourable weather conditions but cautioned that challenges like claims frequency and inflation are anticipated to persist, potentially making this year one of the most challenging in recent memory.
Looking ahead, consumers can expect a 17% surge in premiums in 2023, equating to an average increase of £43 per policy. This inflationary pressure is expected to continue, with a further 16% increase forecasted for 2024, adding an additional £44 on average per policy.
Rodney Bonnard, UK Financial Services Markets Leader at EY said, “Looking ahead, it will be important for UK home insurers to review their operating models to ensure they are best positioned to achieve profitability in a competitive market over the coming years. To do this, firms will need to navigate sustained inflation and uncertainty around the future cost of weather claims, alongside other critical growth areas, including ESG and digital transformation.”
