Subsidence claims set to soar by £120m, experts predict
The UK household market will become less profitable this year due to rising subsidence and theft claims, Deloitte has predicted.
The professional services firm said the market's combined operating ratio (COR) for 2006 would be 97%, compared to 94% in 2005. It forecast a COR of 96% for 2007.
James Rakow, insurance actuary at Deloitte, said: "The key reason we are predicting 2006 to be higher than 2005 is that claims inflation figure is 9% higher.
Subsidence claims are expected to soar from £225m in 2005 to £348m in 2006. This however is expected to tail off to £271m in 2007.
Theft is also expected to grow from £334m to £368m in 2006.
Other claims, such as escape of water, are also expected increase by 9%, if there are no reserve releases in 2006, according to Deloitte in its annual review of the household insurance market.
He said premiums were expected to rise line with retail inflation increases.
Deloitte had predicted £1.41bn of claims incurred due to combined perils loss trends for 2005. The actual total was £1.40bn.
But its latest forecasts for 2006 show an overall increase of more than £100m.
There has not been a major event to hit the household market in the last 16 years. Deloitte said many of its predictions were based on this fact.
