News & Events

Insurance – Review and Outlook

By Simon Bentley.

December 2019 and in Wuhan, Peoples Republic of China the first case of Covid-19 was identified in a human. This quickly spread and on 30th January 2020 the World Health Organisation (WHO) declared Covid 19 as a Public Health Emergency and upgraded it to a pandemic on 11 March 2020.

At the same time as events were unwrapping in Wuhan, globally insurance markets had already been seeing a signal that insurance premium rates would need to increase, this is due to several large catastrophe losses and accumulation of losses wiping out any profits, and in some cases causing insurers to make losses (see below table).  

Words Costliest Natural Disasters in 2020 by insured loss.

Lloyds of London, the global insurance market place had already been through a tough period where the individual syndicates had been asked by their regulators, the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) to review underwriting programs and stop writing business which had made a consistent loss.

So, in 2020 the insurance market reacted again by no longer writing certain lines of business which had historically caused losses, this was a gentle approach with many people only noticing a small increase in premiums. Then March came and that news about a worldwide pandemic and everything started to speed up, premiums rose significantly and covers were limited and some even added in as exclusions.

As we started to see the effects of the pandemic the insurance industry made sweeping changes to protect itself from the costs of the pandemic with a Covid exclusion becoming almost the norm at renewal, with some insurers implementing it if they could earlier and many insurers arbitrarily telling policyholders it did not apply to the business interruption section of their policies.

2021 has been a year of recovery for the economy, not just in the UK but globally, and all seemed to be on track, until the Omicron variant suddenly appeared. During 2021, whilst insurance premiums did not fall, most policyholders did not see too great an increase, there were even a few opportunities to make possible savings.

So what about 2022, what should we expect?

Well, please don’t get too excited! The days of premiums falling year on year are not returning just yet, and this is probably not going to be the case for a while. Care insurance has long been under-priced in the UK and now insurers in some cases have corrected this I don’t see them allowing it to change or reduce dramatically..

Covers are still going to be restricted and the Covid exclusion is probably going to be around forever now. Insurers are still looking at opportunities to make money and this could see some new entrants into the care market in the next few years but initially I think we will see the amount of competition dwindle during 2022.

My advice to all care providers is to look at insurance early, well before renewal, whilst insurer’s terms are usually only valid for 30 days you can start to review the best options for you and your care business – also prepare for any covers which may not be about for you.

At Phoenix we are continuing to work with both large and small care providers on looking at the options available to them. We offer a personal and professional service and will provide you with advice and guidance along the way.

We are delighted to partner with the Outstanding Society in 2021 and continue to do so throughout 2022, so why not give us a call and see what we can do for you. We’d hope to be able to achieve a saving for you and find covers which may not be available elsewhere, so achieving the very best value for money for you.

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