Zurich demands an end to unsustainable pricing

A sustained period of highly competitive pricing among some insurers may leave housing associations exposed to significant increases in their insurance premiums, according to Zurich Municipal.

Zurich it is concerned about the current level of unrealistic insurance pricing, particularly in the social housing sector, and is stressing the need for a return to sustainable pricing to ensure that housing associations aren't left with premium hikes they can ill-afford.

The insurer said that the impact and increasing frequency of severe weather and flooding incidents is a key issue driving up claims costs and this needs to be factored into premiums, but it is not the only factor.

It also claims the cost of liability claims has risen by over 50 per cent since 2003 due to legal costs and lifetime settlement costs for such claims outstripping inflation. The cost of global reinsurance has also risen following significant losses, it said.

Tom Shewry, head of housing at Zurich Municipal, said: "Rates have been reducing for some time now, partly as a result of new capacity in the housing market. But the pressures which led to previous rate increases have not eased.

"If policies continue to be written at the unsustainable rates we are witnessing right now, it will mean in many instances, that current rating levels do not accurately reflect the underlying risk, with a harmful impact on insurer capacity."

Zurich added that that adequate pricing of risk to cover claims costs now and in the future is imperative to ensure that there is capacity to support this market going forward. With the frequency and severity of weather losses set to increase in the future, Zurich reiterated the value of risk management programmes and greater levels of self insurance as a means of controlling premium expenditure.

Shewry continued: "Weather-related losses of the last eighteen months have compounded the issue of rampant claims inflation. Insurers must price adequately now, rather than focus on beating the lowest market rate, which has no correlation to assessing the real risk.

"It is vital that all stakeholders understand the factors that influence pricing and are able to explain the need for rating adequacy in the short term, to avoid greater exposure and instability later on."