Aviva’s Blanc responds to ‘profiteering’ claim after premium rises

Aviva chief executive Amanda Blanc has said that the insurance industry cannot be accused of “profiteering” following premium rises in recent years.

Premiums rose off the back of the Covid-19 pandemic and increases continued into this year – for example, in the motor sector, figures from Confused.com and WTW showed that car insurance premiums saw an annual rise of 43% (£284) from Q1 2023 to Q1 2024.

Today (14 August 2024), Aviva revealed that its UK and Ireland general insurance business secured an operating profit of £287m, up from £230m in H1 2023.

During a conference call, Blanc was asked whether these types of results could open up accusations of potential profiteering when considering the rise in premiums across the industry in recent times.

In response, Blanc said that the combined operating ratio (COR) for motor sat at 113% in 2023, while for home this rose to 122%.

The high COR’s are, in part, due to post-Covid inflation, which resulted in costs to insurers rising.

Blanc also pointed out that within motor, the market was “super competitive”, with rating changes being put through on a constant basis.

“So, if you see improvement in profitability, that is reflected immediately in terms of rating,” Blanc said.

“So, what you saw in Covid, when frequency reduced, was that premiums came down significantly. What you then saw, as frequency went back to more normal levels post-Covid, that effectively premiums needed to go up.

“That combined with significant inflation, in total the cost of the claim was at 18% Q2 2023.

“You’re seeing big numbers, theft claims increasing [and] combined with supply chain issues and labour costs, I genuinely don’t think you can accuse the industry of profiteering.”

Premium decreases

The ABI also explained that 2023 was challenging for motor insurance margins, with EY estimating that, for every £1 in premiums collected, the industry paid out £1.13 in claims and expenses.

But figures from the ABI, published on 5 August 2024, show that the average motor insurance premium paid by customers fell by 2% quarter-on-quarter for the period between April to June.

Meanwhile, the average claim paid out by insurers has remained stable in Q2 2024, with some improvement in specific elements of claims costs.

Mervyn Skeet, director of general insurance policy at ABI, said: “After a very challenging period for insurers and customers alike, we’re encouraged to see an easing of increases to motor insurance premiums as claims costs stabilise.”