The stats: December 2021 – The Acturis Premium Index

Acturis detailed that overall premiums in the index increased by 3.9% in Q3 2021, compared with the same quarter in 2020. The software house explained that this is the biggest increase in the last 18 months.

Gail Smith, commercial technical manager at Ageas, noted that she did not see any big surprises in the figures, adding: “The movements reflect some of the underlying trends driven by performance and technical rate improvement and profile management that the market continues to undertake.”

Property owners
Looking closer at the individual product lines, the largest movement was reported in property owners, with average premiums this quarter increasing by 8.3% when compared to Q3 2020. This is the seventh consecutive quarter of premium growth for this class of business.

Aston Lark group chief executive officer Peter Blanc noted that insurers are “undoubtedly concerned” about inflation and supple chain disruption, which he said will result in a higher severity of claims for commercial property in particular.  

Blanc added: “When a flood or fire claim occurs, the faster the property can be reinstated the lower the ultimate cost of the business interruption element of the claim.

“Right now, it is proving extremely difficult to even obtain supplies with which to repair or rebuild premises and the costs of building materials are increasing at significantly higher rates than the officially quoted Government inflation statistics would suggest.”

Dramatic
Commercial combined saw a smaller but still significant premium increase of 4.9%.

Blanc noted that this was a “dramatic” increase, while insurance industry expert Paul Beck argued that it was “in line” with what he would expect. Beck added that this movement was “keeping pace” with claims inflation.

Furthermore, combined liability was up by 4.7% compared to Q3 2020. With the reception of Q2 2021, combined liability has seen premiums increases every quarter since Q1 2017.

Beck stated that rates have been hardening in this class of business for some time particularly in the construction and manufacturing sectors and this continued throughout 2021.

He added: “The majority of construction firms that we speak to have declared a significantly increased wage roll over their 2020 figures for broadly the same size of workforce.

“These dramatically increased declared labour costs contribute to increased premiums on top of the liability market’s rating increases.”  

Packages
Next, looking at packages premiums were up by 3.8% year-on-year, continuing a positive trend which started in Q2 2019.

Lastly, fleet was the odd one out with the only negative movement of the quarter. However, it only dipped by 0.7% compared to Q3 2020.

Smith noted that it was hard to predict whether the negative streak in fleet will continue into next year.   

She said: “There are a number of moving parts with some reduced frequency of loss as a result of the pandemic, which affects the technical rating. It’s still early days so it’s difficult to predict how much ‘new normal’ on frequency of motor losses will have changed longer term.

“The MOJ changes coming in to effect this year may well be playing a part and will depend on how different insurers are starting to reflect that early in their rating or waiting to understand the true benefits and how they apply to fleet business.”

Beck noted that he was surprised, adding that he was seeing increasing rates in haulage business.

Flex
He added: “Although there is more flexibility than we saw at the beginning of the year and vehicle numbers have returned to, and in many cases exceeded, pre-lockdown levels which drives up premiums.

“But away from the haulage sector it may be that in Q3 other journeys had still not returned to where they once were, which may contribute to the overall reduction in average premium.”

Looking at the commercial lines market more in general, Blanc predicted that brokers will be having “plenty of challenging conversations with clients facing higher bills”.

He added that brokers should be insisting that clients revisit their sums insured across the board.

Blanc concluded: “If underinsurance was a problem in the past, it will be a huge problem in 2022 - unless brokers make sure that customers tackle this head on. Buildings, contents, stock and business interruption indemnity periods will all need a rethink in this bizarre inflationary environment.”