Insurance Premium Increases – When Are They Fair or Unfair?
February 25th, 2014 / Blog / Leave a comment
I recently came across an interesting article in the insurance times where they talk about a Which campaign to get insurers to add as standard last year’s premium next to the renewal invitation premium:
We of course support this, very often clients will only really be able to decide if a renewal invitation is acceptable after comparing the renewal figure with last year’s expiring premium. I cannot recall a time where we have not done this. We even include the percentage of increase/decrease to assist the client in the decision making.
All this aside, the question arises as to when, if ever, is an increase acceptable?
It’s worth remembering that if there have been addition throughout the year, the increases may not be rating increases at all and may just be representative of the “New Annual” figure. Likewise on most material damage policies there is something called “Index Linking”. This means that your sums insured will increase in line with the annual inflation figure, this can be stripped out, although we do not recommend you do this, so again this isn’t strictly a rating increase.
When talking about rating increases its important to take a look at the overall pictures, things that need considering are:
– Current market climate, is insurers capacity increasing or decreasing?
– Has the insurers claims performance deteriorate on the whole, an example of this is likely to be the impact from flooding this year.
– Current rating strength and availability of alternatives. Basically how cheap is your current premiums and is anyone of repute likely to offer anything even close to what you currently have.
I also think it’s important to remember that insurers will always look for some sort of inflationary increase. After all, prices increase for all of us in all walks of life, this will also likely reflect in claims payments insurers need to make so essentially the inflationary increase is designed to keep insurers at the same level as what they were last year.
In closing and answering the question at hand, in my opinion, for a claims free year a 2% to 3% increase should be acceptable in most cases.
This said and even more importantly, always talk to your broker to let him/her know what you are happy with, it’s also very easy to construct an argument for a premium reduction if you have had a claims free year so there is no harm in asking.
The above is an opinion piece by Nicholas Hems, I am always happy to help so feel free to contact me on 0800 7797 880.