As all advisers and many of their customers are fully aware, insurance policies have been facing a consistent hike in terms of price. However, this isn’t a case of ‘typical’ inflation, with augmenting factors playing their part in the current financial climate.
Premiums have increased by roughly 25% throughout the previous calendar year, a clear and significant rise. 2023 was a challenging year regarding fiscal activity and patterns, with insurers having to charge more to meet their rising overheads.
Nevertheless, it’s essential to understand why premiums have increased, and it’s even more imperative to ensure your clients don’t sacrifice their protection due to the present economic environment. Throughout this article, we will look at the reasons for rising insurance premiums and, more importantly, how you and Source can work together to help combat such increases.
Why Are Premiums Increasing?It’s useful to note that in 2022, regulatory alterations from the FCA, such as general insurance pricing practice, were designed to protect customers and premiums, so why have those premiums gone up? Ultimately, it’s a knock-on effect.
According to the ABI, insurers are paying out about £8.6m daily, with an average claim of approximately £4,300, a 24% increase. These raised costs are due to several factors, which are easy to explain.
With the notable heatwaves of the last couple of years followed by significant rainfall impacting both flood and subsidence claims in the home insurance world, premiums have increased to combat how much insurers are paying out. These chunky perils cost a lot for insurers to pay for.
Inflation and raw material shortages over the last couple of years have also played a substantial role in heightened premiums for buildings and contents claims. For example, builders are more expensive than they used to be and take longer due to increased demand and supply chain issues impacting the availability of raw materials.
Some Good NewsInflation is falling across the economy, and we are seeing some normalisation in the supply chains, so premium inflation should return to normal across 2024. However, insurance is typically cyclical, and with volatile claims costs over the last couple of years, it may take insurers some time to refine their pricing.
How Can Source Help to Combat These Premium Increases?Source wants to work with advisers and our customers to help combat the growth of policy fees. There are many ways we can do that. Take a look at the following tips and advice so you can spot the different factors to keep in mind when searching for the perfect insurance policy.
Don’t Include Cover Your Client Doesn’t NeedEnsure your customer reads their documents carefully, particularly the schedule, to ensure they haven’t bought irrelevant extra cover or are duplicating cover provided by another policy.
Consolidate PoliciesConsider combining building, contents, home emergency cover, and away-from-home cover. Source’s CPW product – Source Home Insurance, includes mobile phone cover, for example, for more efficient and often cost-effective protection.
Higher Excess for Lower Premiums Opting for a higher excess can reduce your client’s premium. This self-insurance strategy is effective for those who can manage the higher upfront cost in the event of a claim.
Consult Before Claiming Sometimes, claiming for small amounts may be outside your customer’s best interests. Even these less substantial claims can significantly affect your client’s renewal premium, so they might be better off in the long run by not claiming for small amounts.
Value Over Cost By opting for a cheaper policy, you might sacrifice the quality of cover for your client’s properties. It’s all about finding that fine line between saving money, but not at the expense of sufficient home insurance.
Risk Reduction Measures Suggest the installation and use of equipment that can reduce risk, such as burglar alarms and window locks. Simple steps like preparing your client’s home for winter can significantly reduce the risk of incidents that lead to claims. Read more about preparing your home for winter with our blog here.
We offer quality products that cover all your customers’ needs whilst ensuring you can offer them competitive prices. These factors help Source deliver an experience that puts the customer’s needs first and foremost.
Just Remember…
A ‘cheap’ policy is cheap for a reason – you get what you pay for. You’ll be better served by a high-quality policy that covers your requirements and meets your needs.
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Jonathan Pinkerton, Finance Director, Source Insurance
