A Hard Day's Fight
A Hard Day's Fight
A Hard Day's Fight
Whispers of a hardening market have been reaching the collective ears of the insurance industry for the past few months, and the signs are that those whispers are starting to make themselves felt.
As everything from terrorism, to global warming to the credit crunch is starting to have its affect, the UK's leading insurers are starting to increase premiums with the trickle down now reaching thousands of households and businesses across the UK.
This article examines in some depth the reasons behind these increases, how it may affect your business, and how with a quick response now, we can help you protect your business from future hikes.
The summer floods were a timely reminder of the continued concerns surrounding climate change, and have contributed significantly to the increase in property premiums. This, combined with the ongoing battle for government funded flood defences, proves a worrying time for insurers:
Historically insurers have anticipated major geographical or climatically significant events such as the 1987 hurricane or 2005 Carlisle floods, occurring once in a hundred years. In the past 20 years, six of these events have occurred and property premiums will continue to feel the affect of this. A conservative estimate of the overall cost of these events is 7.5bn. Insurers expect the impact of climate change to continue, and therefore a cautious approach to future costs is reflected in premium increases.
An unbalanced relationship between supply and demand of world commodities has seen property claims inflation increase by 5% in the last year. Insurers anticipate a continued growth in this inflation, driven by demand from China and India.
Local authority legislation covering new building design and planning permission, has increased the cost of replacement and repair as environmental and energy efficiency considerations have to be factored in.
Insurers have recognised the increased frequency of loss related to modern methods of construction which typically use lighter weight and less resilient materials than historical methods.
Liability
Mortality and life expectancy rates are currently in flux, creating uncertainty about future care costs particularly in personal accident and fatal accident cases. Insurers expect future care costs to continue to rise in 2008 and beyond.
An increasing number of stories have appeared in the press about
goods manufactured abroad not meeting safety standards. This
has contributed to a 32% increase in the reporting of dangerous
products
Legislation which came into force from January 2007 has seen
NHS recoveries reach 505 per outpatient visit, and 620 per day
as an inpatient
Newer forms of liability claims are continually emerging and insurers
are now reserving for:
Stress - an estimated 12.8m working days were lost due to stress
in 2004/05
Environmental smoke - despite the smoking ban, insurers expect
related claims to continue
Electro Magnetic Fields (EMF) - the uncertain outcome of studies
investigating the impact of EMF's is encouraging insurers to
prepare reserves
Motor
The average claims cost has increased by 7% per annum and looks
set to rise further. With more motorists on our roads, the UK's leading
insurers feel the following factors are amongst the key reasons why
rates need to go up:
Overall claims inflation has increased by 5% per year whilst rates
have reduced in real terms by 20% in the last four years
Repair costs to vehicles is increasing on average 3% year on year
due to increasingly sophisticated vehicle technology
Bodily injury now represents 45% of each claim compared to 25%
in 1999, amounting to costlier claims
Increased frequency and cost of losses in excess of 100,000
The Courts Act 2003 (effective April 2005) has led to increased
costs of claims where periodical payments are awarded in place
of lump sums
Accident frequency exceeded 30% for the first time in Motor
Fleet
Taken together, these factors mean the time to act to protect your
business is now
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