A sustained period of highly competitive pricing among some insurers may leave Housing Associations exposed to significant increases in their insurance premiums, according to Zurich Municipal.
Zurich is concerned about the current level of unrealistic insurance pricing, particularly in the social housing sector, and is stressing the need for a return to sustainable pricing to ensure that housing associations aren’t left with premium hikes they can ill-afford.
The impact and increasing frequency of severe weather and flooding incidents is a key issue driving up claims costs and this needs to be factored into premiums, but it is not the only factor.
The cost of liability claims (including injury claims) has risen by over 50 per cent since 2003 due to legal costs and lifetime settlement costs for such claims outstripping inflation. The cost of global reinsurance (which enables insurers to offer higher protection levels) has also risen following significant losses.
The insurance market has a responsibility to support realistic pricing to provide social landlords with the protection that both they and their tenants need now and in the future.
Tom Shewry, Head of Housing at Zurich Municipal said: “Rates have been reducing for some time now, partly as a result of new capacity in the housing market. But the pressures which led to previous rate increases have not eased. If policies continue to be written at the unsustainable rates we are witnessing right now, it will mean in many instances, that current rating levels do not accurately reflect the underlying risk, with a harmful impact on insurer capacity.”
Adequate pricing of risk to cover claims costs now and in the future is imperative to ensure that there is capacity to support this market going forward. With the frequency and severity of weather losses set to increase in future Zurich is also reiterating the value of risk management programmes and greater levels of self insurance as a means of controlling premium expenditure.
Mr Shewry continued: “Weather-related losses of the last eighteen months have compounded the issue of rampant claims inflation. Insurers must price adequately now, rather than focus on beating the lowest market rate, which has no correlation to assessing the real risk. It is vital that all stakeholders understand the factors that influence pricing and are able to explain the need for rating adequacy in the short term, to avoid greater exposure and instability later on.”
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For further information contact
Louise Naqvi, Zurich on t: 01489 561574 m: 07875 885120: e: louise.naqvi@uk.zurich.com
Notes to Editors :
Zurich Municipal is the leading provider of risk and insurance solutions to Britain's public services. We are dedicated to providing expert advice and support to public service providers. For information visit www.zurichmunicipal.com
Zurich Financial Services Group (Zurich) is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Founded in 1872, the Group is headquartered in Zurich, Switzerland. It employs approximately 60,000 people serving customers in more than 170 countries.
