Sabre has ‘been able to hold our nerve’ during pandemic lockdowns

Despite Sabre Insurance Group’s premiums falling by 12% in 2020, chief executive Geoff Carter said the firm is “extremely well-funded for future growth opportunities that we’ve seen come in the waters” and has “been able to hold our nerve more so than perhaps other people will have done”.

Speaking exclusively to Insurance Times following the publication of Sabre’s 2020 full-year financial results last month, Carter explained that the insurer has already put its “prices up by 10% year-on-year, across the year, against a market backdrop of premiums [being] either flat or down”.

This means the business is “extremely well-funded for future growth opportunities” as it has “taken our pain” earlier than competitors.

“We are now in a fully funded position,” Carter said. “As we sit here today, we don’t really need to increase our prices other than covering ongoing claims inflation, for the foreseeable future.

“Other people, we think, will need to unwind some of their Covid discounts, they may have over-discounted for the whiplash benefits. Quote volumes will increase a lot, we think, from April.

“Car showrooms have been shut now for [just over] three months. Car showrooms open, that will bring a lot of new drivers or cars into market, driving tests will bring a lot of new drivers. You’ve almost now got a year and a half of driving tests to try and squeeze in as rapidly as possible – there’s going to be a huge pent-up demand for new drivers to market. And then, people are going to have to change their prices for claims inflation.

“So, what we basically do is we can almost stand still and just keep our rates where they are as others need to increase their prices for all those things. Our growth is by having done the right stuff - others now need to react and we can hold our position.

“We’ve been able to hold our nerve more so than perhaps other people will have done.”

Thanks to these actions, Carter expects “premium to bounce back”. He continued: “April and May will be really interesting months. We think competitors have over-discounted to chase that lower volume in the market.

“Sabre is very unusual in that we’re focused on profit, not on top line.”

Carter attributed last year’s premium dip to being “entirely driven by the lockdowns”.

“There’s been a lot less people buying cars and virtually no one passing their driving test. Normally there’s about 1.5 million driving tests a year with a 50% pass rate – that’s an awful lot of drivers who haven’t come to life let this year,” he added.

Significant market change

Speaking on broader industry trends, Carter believes the impact of the FCA’s general insurance pricing review, which has been designed to tackle price walking, is “absolutely fundamental” for the sector.

“It’s hard to overstate how significant that is for the industry and quite what a difference that could make to how people price, how people shop around, whether [people] will go back to the market to shop around,” he said.

Despite this, Sabre won’t be affected by any incoming changes, Carter added.

“We don’t differentially price, so in and of itself – for us – it has no impact at all, we don’t need to change anything at all in how we work,” he explained.

“We think it’s a big market impact - I can’t see why there won’t be significant increases in new business pricing, which we think will make us significantly more competitive as that cuts in.

“From a Sabre point of view, people tend to come to us because something has changed in their life – it might be there’s a new young driver, they may have bought a new car, their current insurer is not competitive for them, they may have moved house, they may have got a speeding conviction.

“I don’t think it will impact our volume as much as it might do mass market insurers, where people just shop around every year expecting to find a cheaper price. Going forward, they may not find that cheaper price [like] they used to.”

However, Carter warned that ahead of the pricing reform implementation – which is scheduled for the end of 2021 – “some insurers are [using] a very aggressive growth strategy, so they go into that new world with the largest portfolio they can manage”.

In terms of the potential impact the pricing changes could have on price comparison websites (PCWs), Carter added: “I don’t think there will be an immediate impact because people won’t know that the change has happened.

“Anyone who has changed their details will still go back and look for a comparative price. I think [PCWs] may have to work harder in maybe two years’ time, when people have just stopped seeing those year-on-year discounts. Will they still have the same incentive to go back and research for the price?

“I think it’ll be a longer-term change. They’re very entrepreneurial – I’m sure they’ll be looking at their own business models and thinking how they adapt to it.”