Briefing: Trump wants to ‘end inflation’ – but insurance data suggests this won’t be easy

By news editor James Cowen 

Unless you are living under a rock, you will have seen that Donald Trump has been given a second chance to be president by the American people.

He was voted out of the White House in 2020, but after a long 2024 campaign – which saw Trump survive two assassination attempts – the billionaire achieved one of the most historic comebacks in US political history this month (November 2024).

Presidential candidates must achieve 270 electoral votes or more to win – at the time of writing, Trump had received 279 votes, with four states yet to declare their results.

Key to the businessman’s election were his pledges, with Trump’s campaign website listing 20 promises to the American people. Number three on the list is his commitment to “end inflation and make America affordable again”.

Inflation issues

Inflation is certainly a topic of conversation us Brits are well versed in. For example, the UK saw inflation really pick up in 2022, with the Office for National Statistics recording an 11.1% rate in October that year.

At that point in time, this was the highest recorded inflation rate compared to the prior 40 years.

The UK insurance industry firmly felt the effects of this high inflation. For example, figures from accounting firm EY, published on 22 October 2024, showed that the UK home market delivered a net combined ratio (NCR) of 118% during 2023.

EY listed supply chain pressures, increased claims frequency and high inflation as key causes behind this loss-making figure.

Motor insurers have not had it easy either, with claims inflation seeing them struggle to make an underwriting profit.

According to analysis by market intelligence firm Insurance DataLab, published in August 2024, the aggregate motor insurance combined operating ratio (COR) for 2023/24 was an unprofitable 119%.

Is inflation easing?

The good news is that inflation increases appear to be slowing down.

This was first noticed at the back end of 2023, with Tara Foley, Axa UK and Ireland chief executive, explaining that her firm was “beginning to see a reduction in inflation” and that this could “gradually have a positive impact on COR”.

An improved COR not only helps with internal business profitability, but it can also improve pricing. Figures published during 2024 confirm this trend.

For example, according to data from Consumer Intelligence published in August, Q2 2024 ended 19 consecutive months of home insurance premium increases, with quoted premiums falling 1.1% between April and June this year.

And in the motor sector, ABI data published in the same month showed that the average motor insurance premium fell by 2% during the same reporting period.

Easier said than done?

While rising inflation seems to be slowing, that does not mean it is going to be easy to get rid of.

This is because the world environment is constantly changing. Following years of low inflation, rates really started to bite off the back of the Covid-19 pandemic, which ended in 2022.

Also in 2022, Russia invaded Ukraine, leading to heightened claims inflation due to issues with the production and transportation of goods.

So, when Trump pledges that he will “end inflation”, there is no doubt about this being a bold statement, but – in my view – it is likely to be a promise that is easier said than done.