A relatively dry and settled summer of weather saw claims for damage plateau, whilst people were confined to their homes, meaning a far lower number of theft claims. That combined ensures that the industry should turn a slight profit in 2020, but that is not the full story.
Sector “will enter the red in 2021”
Claims inflation is set to rise in 2021, picking up from a 4.4% low in 2020, but premiums are likely to remain flat in the face of the unique circumstances and lower claims volume in 2020. Combining the two means the market is likely to show a 2% contraction in the next 12 months, although many external forces could well change that. Abnormal weather could see claims rise further, whilst nobody can predict the effect the pandemic will continue to have. The buying patterns of UK homeowners could also affect the direction the market takes. With specific areas of concern down, such as burglary, there is a trend towards more bespoke policies that cover services around the home. That is especially pertinent with more people working from home and the expected increase in remote working into 2021. Reuters reports that the number of permanent homeworkers could double, even after restrictions are lifted, as companies become wise to the benefits that come with slashing overheads. That is likely to result in more robust cover for specific household services that are placed under increased pressure with home offices and people remaining at home all week. The range of policies offered by HomeServe demonstrates how variety has entered the market, giving the customer a chance to tailor cover to their specific needs, rather than having a blanket approach. That might be covering the plumbing and heating, incorporating a boiler service, and maybe even the electrics. All are services that may go wrong with increased use and, in some instances, at the very least, are not often covered by a standard buildings policy. Lifestyles are changing, working patterns are evolving, and all have a profound effect on the insurance industry. Exactly which direction it will take is unclear, but it does seem that 2021 is set to be the most challenging for the UK sector since the sharp recession of 2009.
