Why Insurance Premiums May Be Set to Rise
In recent weeks there has been a lot of focus and discussion throughout the Insurance industry and beyond on the potential for significant increases in insurance premiums. There are many factors influencing this, and we thought it would be useful to share some of them with you.
High Personal Injury Costs
The costs of covering personal injury claims have risen quite dramatically for insurers. This is partly driven by the increase in the amount of claims including a personal injury element over the past decade or so. Since 2005, motor personal injury claims have risen by around 40%, while road accidents for the same period have fallen by nearly 35%.
Another significant factor has been changes in the calculation for how much money insurance companies should pay when people suffer life changing injuries, known as the ‘Ogden Discount Rate’.
Insurers Exiting Markets
Some insurers have reevaluated their position in the market at the end of the decade. Typically, they do this by charging excessive premiums at renewal. This is across the board as insurers decide upon new areas of insurance to focus on.
If you see a substantial increase it may be worth shopping around with an insurance broker or price comparison site. If you use such a site, please check the fine print on the cover being offered and level of excess you would be expected to pay in case of a claim.
Concerns Over Property Security
Fire remains a major issue in the Commercial Property sector. There have been some high-profile cases such as Grenfell tower, Chester Zoo and others which have raised concerns among insurers. There are some ways of reducing the premium by ensuring that you have appropriate security and safety measures in place. Insurers will typically offer lower premiums for commercial properties when certain security conditions are met.
The Rise of Severe Weather
As severe weather is becoming increasingly recurrent and extreme, individuals and businesses are seeing a rise in weather-related incidents. In incidents such as flooding, not only can this affect their property and contents, but may also mean having to seek alternative accommodation or temporarily ceasing trading.
Insurers have held off pushing through premium increases preferring other methods such as higher excesses amongst others. This works to a point but premiums aren’t where they should be.
Rising Professional Indemnity Costs
One area where we have seen increases in recent months is with professional indemnity insurance. A number of insurers have exited this market in recent times, meaning reduced capacity within the industry, and ultimately reduced options for those looking to purchase professional indemnity insurance. Historically, it is not unusual for PI insurance cost rises to be a ‘leading indicator’ of increases elsewhere in the insurance market, and there is evidence that the reduced capacity within the PI market is being mirrored in the likes of the motor insurance market.
Watch out for increasing excesses. If your insurance premium has not drastically increased be sure to check the fine print and see what excess you are paying in the event of a claim. Increasing excesses are a way to discourage smaller claims and for insurers to reduce their losses. If the excess is set too high you may be unable to afford to claim on your insurance.
The main reason for the upward trend is the substantial increase in the volume of smaller claims in some areas, according to Brian Brown, a consumer finance expert at Defaqto.
Look beyond the premium, make sure that excesses are not excessive and that the cover is adequate.
How Can We Help?
As an independent broker, we shop around for the best policy on behalf of our customers. Our mission is simple to try and make sure that our customers are getting the right cover at the right price. Call us on 01527 874092 to discuss your insurance policy with us.