According to a recent analysis by EY, UK home insurers remained in the red in 2023, only marginally improving on record losses from 2022, posting a loss-making net combined ratio (NCR) of 118% in 2023, a slight improvement from 2022’s 122%.
Despite fewer than average major weather events, UK home insurers’ balance sheets were still challenged throughout 2023, primarily due to ongoing supply chain pressures, increased claims frequency and high inflation.
Interestingly, over the course of the year, for every £1 in consumer premiums, EY estimates UK home insurers paid out £1.18 in claims and expenses.
Additionally, EY expects these pressures to persist this year, as the forecast for 2024 remains loss-making with an NCR of 108%. However, if market conditions continue to ease and weather events remain at average levels, organisations are expected to record an NCR of 100% in 2025, noted EY.
Matthew Wheatley, UK General Insurance Partner at EY, commented: “It was another challenging year for the UK home insurance industry in 2023. Although inflation began to ease last year, claims frequency was high and supply chain issues remained, meaning firms faced another year of significant losses and will have to pass some costs on to the customer. We expect firms to get closer to profitability over the course of 2024 and 2025, providing inflation continues to stabilise.”
Furthermore, market pressures are expected to continue impacting consumer premiums, with EY forecasting that the average written premiums will increase by 19% in 2024 (adding £49 to an average policy), with a further 7% increase forecast in 2025 (adding another £21 on average per policy).
Martina Neary, UK Insurance Leader at EY, said: “Many UK home insurers delayed raising premiums in line with inflation in 2022 to maintain competitiveness in the wake of the FCA’s pricing reforms. This drove a sharp rise in premiums in 2023 and is expected to continue in 2024 as firms navigate persistent high inflation and supply chain challenges.”
Concluding: “2024 will ultimately be another difficult year for both firms and for customers. Firms will need to carefully balance a range of challenges, from supporting customers facing financial difficulty, to investing in critical growth areas such as digital transformation and navigating uncertainty around climate change.”
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.