Commenting on the trade deal between the US and UK, as well as the Bank of England’s interest rate cut, Alex Bertolotti, Insurance Leader at PwC UK, noted that while UK insurance companies do not anticipate a direct impact, they are likely to welcome the reduced secondary effects on their supply chains.
As per Bertolotti, this should reduce costs, which UK insurers can pass on to customers through reduced premiums.
“One of the most significant impacts is the reduction in uncertainty and increase in economic stability that a signed deal gives for UK insurers,” he added.
Bertolotti continued, “Insurers will be looking at today’s double whammy announcement of a trade agreement and falling interest rates closely.
“This should reduce credit spreads on UK life insurers, which should bring more certainty to life insurers – and the regulator will be looking for companies to be as clear and transparent as possible with customers about what the impact will be.”
Commenting on the Bank of England’s interest rate cut to 4.25%, Bertolotti noted, “Over the years, higher interest rates have provided insurers with stable investment returns and a welcome return to profitable investment income. As interest rates gradually fall, insurers may look to adjust their pricing strategies”.
He went on, “Even if there is a knock-on impact on insurance premiums, there will likely be variances in approach as some insurers may choose not to increase premiums to maintain or grow their market share.
“This underscores the importance of consumers shopping around for the best deal, both on price but also looking carefully at what the insurance product covers.
“It is always important to fully understand what you are buying and what exactly you are getting for your insurance premium.”
