Insurance premiums – PwC’s 2016 outlook

Published at 08:53 AM on 12 January 2016

Commenting on the 2016 outlook for insurance premiums, Mohammad Khan, UK general insurance leader at PwC, said:

"Given the flooding throughout December and January, the outlook for UK household insurance premiums is mixed. For those not affected by this winter’s flooding, competition between insurance companies for their business is increasing, meaning people can expect to renew their policies for lower premiums - by about 1% - 5% - if they shop around.

“For those affected by the floods, their premium rate is likely to depend on when their policy is due for renewal. If it's due for renewal before Flood Re starts operating in April this year then it is likely that their insurance premiums will increase (although they are likely to fall again when they renew the following year, when they will be eligible under the Flood Re scheme).

"If a homeowner’s premium is due for renewal after April and their home has been flooded regularly over the last few years, their insurance premium is likely to fall significantly due to Flood Re - for some people this could be by thousands of pounds.

"For those who have been affected by flooding for the first time this winter, and had not been flooded in the last few years (such as certain areas of Scotland and Wales), insurance premiums are likely to increase by between 0% and 15%, despite shopping around as insurers will now view them as living in an area at risk of flooding. Without Flood Re, their premiums would have increased by a much larger amount.  

“Oil prices falling below $33 a barrel, and the resulting drop in petrol and diesel prices will likely mean increased motor insurance premiums of between 1% - 7.5% compared to last year. Lower petrol and diesel prices generally tends to encourage more drivers on the road and, unfortunately, an increased number of accidents. This leads to an increased number of claims insurance companies have to pay out and is translated into to higher premiums for the general public.

“Commercial insurance premiums will generally be lower in 2016 compared to 2015. Competition for commercial lines insurance has intensified and is likely to continue in 2016. Terms and conditions are becoming looser so, even if insurers can retain premium rates, businesses will be able to get advantageous terms and conditions (more cover, lower deductibles) for the same premium. The only exception to this will be for properties that have been affected by the December 2015 and January 2016 floods. Commercial property insurance for those properties will rise significantly, by more than 100% for some businesses. Business interruption insurance for those properties will also rise significantly."

Ends.

Notes for editors.

  1. Mohammad Khan is available for interviews. Please contact Ellie Raven on [email protected], +44 (0) 207 804 3663 or +44 (0) 7525 925 830.
  2. Flood Re will launch in April 2016. It will enable flood cover to be affordable for those households at highest risk of flooding, increase availability and choice of insurers for customers, allow time for the Government, local authorities, insurers and communities to become better prepared for flooding, create a 'level playing field' for new entrants and existing insurers in the UK home insurance market. For more information on Flood Re, visit their website: http://www.floodre.co.uk/

About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

© 2016 PwC. All rights reserved

Ends.


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About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. © 2016 PwC. All rights reserved

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