Household insurance premiums are going up because insurers are starting to lose money, Kevin Paterson, managing director of Red Apple Group, an insurance quotation and financing services, has noted.
He said that some of that is still historic, due to storm related claims, but it’s down to years of racing to the bottom, in terms of competition.
Paterson said: “There’s heavy competition with new providers coming to the market trying to undercut each other.
“We saw that in the mortgage market way back before the credit crunch and then consequently they can’t make money so the prices have to harden and go back up. So we’re seeing that this year across the entire range.”
He said that it’s not something unique to Red Apple but is across the market and that insurance tends to go in cycles with one bad year, then a good year, another good year, then a bad year followed by another good year.
Paterson added: “It’s very difficult to plan for because you can’t forecast your losses. A claim wave follows events and there’s not a cut off period for claims.
“Like Storm Hector could’ve been another biggie that cost the industry millions but it didn’t’
“Insurance companies predict and monitor losses very closely and have reserves and reinsurers sitting behind them but can’t tell what the year will be like until they’re well into it.
“This year the market is hardening because last year the rates were too cheap so we’re seeing that.”