Fitch said that UK motor and home insurers could have lower profits in late 2021 and into 2022 as they update their pricing systems and reduce their premium rates for long standing customers once new rules come into effect.
According to Fitch, the sector's profitability is already weak, so it is not viable for insurers to significantly cut prices in one area without raising them in another.
However, it does not expect long-term structurally weaker profitability as it believes insurers will offset the price cuts for existing customers with price rises for new customers but that assumes al insurers take that route.
Wise to anticipate pressure on profit margins and deploy proven digital claims management platforms that: -
- Reduce overall licensing costs
- Deliver faster time to value through N0-Code
- Identify large losses earlier to avoid under-reserving
- Reduce indemnity cost
- Reduce OPEX
The agency expects the home insurance market to be more affected than the motor market because home insurance customers tend to stay with one provider, whereas price comparison websites have led to much more shopping around in the motor market. The average ratio of new to renewal business as measured by gross written premiums is about 20/80 for home insurers and about 50/50 for motor insurers.
Time to act
Analysts at Fitch Ratings have warned that the new rules brought forward by the Financial Conduct Authority (FCA) to tackle high insurance prices could reduce the profitability of UK's non-life insurers.