Can the market hold its nerve and raise rates to the necessary level?

The year has barely begun, but the familiar moans about commercial lines rates scraping along the bottom are already audible. In personal lines, 2011 is likely to be a very different story. High claims frequency and inflation should trigger rate rises in the three main elements of personal lines: travel, motor and household.

Following last week’s profit warning by RSA, insurers will have to price in the increasing likelihood of an annual big freeze, and will almost certainly push up rates in household this year, probably by around 10%.

Looking at travel, double-digit rate increases were pushed through towards the end of last year by AXA. Soaring medical expenses and increasing frequency of large losses need to be tackled through rate rises.

And, of course, large rate hikes in motor are once again on the horizon, although perhaps not quite as high as last year. The scourge of bodily injury claims still has some way to go.

The pace of rate increases in personal lines will vary among individual insurers, according to how late or early they recognised claims inflation. What remains to be seen, especially in motor, is whether the market holds its collective nerve or some players break ranks by gunning for growth. There could definitely be some surprises in store.

• Finally, a quick reminder that entries are open for Insurance Times’s inaugural UK Claims Excellence Awards. To ensure your achievements in the sector are recognised, submit your entry by 18 February. We’ll see you at the Waldorf. IT