E&Y predicts home insurance to fall into underwriting loss for 2018
The home insurance market is under ‘strain’ and will barely make an underwriting profit (99% net combined ratio) this year, according to E&Y.
And the consultancy firm predicts an even more difficult picture for 2018 as underwriting losses deteriorate to 101.7%.
E&Y says rising claims costs, fierce pricing and new entrants are causing the pressures.
Home insurers have experienced continued rate deflation of -1% throughout 2017 alongside claims inflation at 3.7% year on year as they struggle to remain competitive in a low interest rate environment with ever rising expenses, says E&Y.
Tony Sault, UK general insurance leader at EY said: “The outlook for the next couple of years is looking challenging for home insurers – even if the UK isn’t hit with particularly damaging weather.
“While there is evidence of an increase in new business and renewal rates, competitive pressures are really impacting market premiums.
“This, combined with rising claims and expense inflation, means insurers’ profit levels are under increasing strain.
“Competitive pressures are not just coming from the traditional players either.
“New digital entrants are transforming the status quo with the latest tech innovations, forcing established insurers to adapt and adopt new technologies in order to remain relevant.
“Increasing investment in InsurTech whilst having an impact on the bottom line in the short term, has the potential to pay dividends in the medium-long term.”