Insurers have been struggling to keep premiums down amid soaring inflation in recent times, and the spike in weather events in 2023 leading to a claims record is unwelcome news for insurers and customers. Consumers have seen high premium inflation in motor and pet in recent years, and the high number of household claims in 2023 suggests a probable rise in premiums in 2024.
GlobalData’s 2023 UK Insurance Consumer Survey found that 12.2% of claims were made because of weather incidents in 2023, with a further 9.2% and 8.9% specifically because of storms and flooding, respectively. This represents a significant proportion of the total claims in 2023. Insurers can advise customers or recommend equipment to help reduce water damage, but severe weather incidents can be very damaging despite any precautions customers can take.
The Association of British Insurers found that weather-related claims increased by 36% to reach £573m in 2023. This was largely due to high-profile storms such as Babet, Ciaran, and Debi that hit in late 2023. There has been higher-than-usual rainfall already in 2024, so there seems to be little sign of easing for insurers.
This is a concern for insurers as they will have to pass the costs of these increased claims onto consumers in the form of higher premiums for the rest of the year. The question though is how much more premium inflation consumers can manage. GlobalData’s 2023 UK Insurance Consumer Survey found that 5.9% had considered switching their household insurance provider due to inflation, 4.3% were still considering doing so, and 3.5% were considering cancelling the product completely because of rising costs. This suggests that insurers will have to be careful how much of these rising claims costs they pass onto customers. However, they have faced their own inflationary pressures over the past couple of years, so soaring weather costs will further squeeze their margins as well. Household insurance is a product for which insurers will be wary about losing customers. The main trigger for purchasing household insurance is owning a property, but this key life event is being pushed back later and later in consumers’ lives due to a range of macroeconomic factors. Therefore, insurers need to do everything they can to retain customers, as attracting new, younger generations to the market will be harder than ever.
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By GlobalData
