Allianz Cornhill says impact of storms could slow softening in home market
Home insurance rates could rise following the deadly storms that tore across the UK, wreaking havoc last week, Allianz Cornhill has predicted.
The storm is expected to cost insurers hundreds of millions of pounds in claims, and the insurer says its impact could slow the decline in rates in the household sector.
Steven Ward, household manager of personal lines, Allianz Cornhill, said: "The rates in the market have been softening over the last 18 months to two years because of the lack of significant claims events. I think insurers who have adopted a more gung-ho approach on pricing may be feeling more exposure as a result of the recent event.
"My feeling is it will bring some sanity to the market and people will need to think about the adequacy of their premiums [rates]. The hope is we won't see more softening in the short term."
Over the last three years insurers have paid out on average £600m a year to policyholders hit by storms, according to the ABI.
Analysts at Numis Insurance said the damage in the UK would appear to be considerably less than that caused by the stronger storm of 1987, which cost the insurance industry £2.51bn.
It added that if the latest predicted costs were correct, it would expect insurers' budgets set out at the beginning of the year to be more than adequate to absorb the losses from the storm.
But it warned there would be less cover remaining for further catastrophes during the rest of the year.
Last year, professional services firm Deloitte predicted the UK household insurance market would become less profitable due to rising subsidence and claims theft. It said the market's combined operating ratio (COR) for 2006 would be 97%, compared to 94% in 2005.