Over a third of insurance industry respondents to the firm’s poll cited inflation as the standout challenge ahead of other issues such as digitalisation, climate change, regulation, Covid-19, cybercrime and geopolitics
A poll of insurers has revealed that inflation tops their list of concerns for 2023.
According to research conducted by analytics firm GlobalData, record inflation and the cost of living crisis will be the greatest challenge faced by the insurance sector next year.
Over a third of insurance industry respondents to the firm’s online poll cited inflation as the standout challenge for 2023 ahead of other issues such as digitalisation, climate change, regulation, Covid-19, cybercrime and geopolitics.
Exactly 36.4 of respondents selected inflation, compared to the next most commonly selected issue – digital transformation, which received 17.9% of the vote.
Ben Carey-Evans, senior insurance analyst at GlobalData, said: “Inflation poses such a significant threat to insurers as they face a double-edged sword.
“Insurers will face inflationary pressure themselves in terms of the costs of running their business and claim costs will rise as a result of supplies and work becoming more expensive.
“However, while insurers would usually pass on higher claims costs to consumers in the form of higher premiums, individuals in the UK have less disposeable income than ever, with the cost of living soaring and wages remaining stagnant.”
This, explained Carey-Evans, would make it difficult for insurers to implement premium rate increases while not losing customers.
Clued-up consumers
To add to the worries caused by inflation, GlobalData’s 2022 UK Insurance Consumer Survey – conducted in Q3 2022 – found that, across personal lines products, consumers were conducting more research at renewal while not necessarily switching their provider more.
Read: Lloyd’s of London expects 14.3% top line growth in 2023
Read: Briefing – ‘Inflation is not fundamentally bad for the industry’ despite uptick to 11.1%
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This was put down to the impact of the FCA’s price walking reforms that prevented insurers offering new customers preferential rates, as well as to rising costs for insurers leading to an inability to offer cheaper premiums.
Carey-Evans added that this meant that insurers that offered “some point of differentiation” were likely to pick up more new business as consumers increasingly sought added value.
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