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Viewpoint Autumn
- Market news
- Are premium increases on the horizon?
- Insurance and risk
- What options are left for companies caught in the credit crisis?
- Pleural plaques – a ticking time bomb for UK business?
- Is your business vulnerable to the virus?
- Sink or swim – would your business stay afloat after a flood?
- Environmental Liability - the polluter pays
- Insurance Clinic
- Insurance Clinic
Are premium increases on the horizon?
Fierce competition between providers and excess capacity have continued to drive rates down, motor has experienced some stability but property and liability premiums continue to fall. While one or two of the larger insurers have started to implement an 'improve it or lose it' approach, seeking premium increases at the risk of losing business, they are still very much in the minority.
Reduced rates are giving businesses some respite from the recession, but the situation is unlikely to be sustainable in the long term.
Claims inflation has become a major concern for insurers. Rising medical and legal costs, combined with the UK’s deeply entrenched compensation culture, have resulted in an increase in claims costs and the situation has been made worse by the economic downturn. There is very little investment return to be made at present and mounting pressure for premium increases.
The much-hyped “Solvency II” directive, set to come into force in 2012, will also impact premiums. The new European regulations may force UK insurers to seek £50 billion in fresh equity from shareholders, a number equal to the industry’s current market capitalization, and insurance professionals have warned that this could lead to a sharp increase in rates.
The Association of British Insurers (ABI) is urging the Government and European Commission to intervene, Stephen Hadrill, ABI Director General is reported to have said,
”This huge over-capitalisation will mean that investment returns in insurance will fall, companies will exit the market, prices will rise, cover will reduce and innovation will lessen."
Despite the bleak outlook, there is still action you can take to gain control over the insurance costs in your business.
Robust risk management is absolutely crucial; companies that have effectively identified and minimised business risks are more likely to avoid significant premium increases.
Additionally, you should review your current sums insured and financial estimates to ensure you are insuring on the correct basis. With so much pressure on insurers to deliver underwriting profit, claims are being scrutinized more than ever and, if you are underinsured, your business may suffer from additional financial loss. Conversely, with many businesses reducing in size, over insurance is a cost you do not want to bear either.
Whether Government intervention is effective in reducing the impact of Solvency II or not, it is clear that the industry is facing a volatile time ahead. Never has there been a greater need for firms (or indeed individuals) to have truly professional and experienced advisors in their armoury.
Contact us
To discuss the issues raised in this article or for further information please speak to your usual Perkins Slade contact. Alternatively, you can call 0121 698 8000 and ask to speak to a member of our Corporate team or email corporate@perkins-slade.com.
With almost 40 years in the business and around 100 staff (many of whom have worked for a variety of broking houses, national and international) Perkins Slade continues to be the reliable choice throughout the market cycle.
