Inflationary pressures put property insurers on red alert as losses continue

UK property insurers have fallen to an underwriting loss in four of the last five years despite a 17% drop in claims in 2021.

The UK property insurance market continues to make underwriting losses despite falling claims, according to the latest analysis from Insurance DataLab.

UK property underwriters reported an aggregate combined operating ratio (COR) of 102.3% for 2021. Although this is an improvement on the 110.5% ratio reported for 2020 – the highest across the five years of this analysis – the figure still sits firmly in loss-making territory.

The improvement in the market’s COR over the course of 2021 was driven by a 16.5% drop in claims, with the total gross claims incurred falling to £6.9bn for 2021.

This is down from £8.3bn for the previous year – 2020 was adversely affected by a rise in home insurance claims with many people working from home in the wake of the Covid-19 pandemic.

Despite this improvement over the course of 2021, claims were still higher than the amount paid out over each of the preceding three years.

And this will be a concern for insurers, with the ongoing war in Ukraine and the global supply chain and cost of living crises driving up material costs for a whole host of property claims.

A shortage of skilled labour is also leading to delays to property repairs, and for larger claims where alternative accommodation is needed for the duration of the repair, this will also lead to higher claims costs going forward.

And then there is the issue of climate change.

Extreme weather events are becoming increasingly frequent and more severe, which in turn will lead to an increase in the frequency and severity of claims hitting property insurers’ books.

Even the hotter summers we are expected to face over the coming years – with record temperatures already experienced this year – will take their toll, with millions of British homes expected to be exposed to subsidence claims as a result of the shrink-swell effect caused by wet spells followed by dry.

So, while claims may have fallen over the last 12 months, it is looking increasingly likely that 2022 will lead to a return to increased claims costs. And the future after that doesn’t look much better either.

About Insurance DataLab is a market intelligence and research service, focusing on the performance of insurers, Lloyd’s syndicates, MGAs and brokers based in the UK and Gibraltar.

With hundreds of thousands of data points covering almost £100bn of annual gross written premium and featuring more than 1,000 insurance companies and brands, provides access to comparable industry data to help providers benchmark performance, assess existing and potential partners and identify new opportunities.


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