The UK’s insurance sector is grappling with substantial disruptions as global insurers Allianz and AXA implement significant rate increases, according to a recent report by Bloomberg Intelligence (BI), a provider of financial analysis and research.
In a stark contrast to other European markets, personal line price hikes in the UK and Ireland are considerably higher, indicating a more severe crisis and market disruption in these regions.
In the first quarter of 2024, AXA raised its prices by 51.7%, targeting an improvement in its motor insurance portfolio performance. Similarly, Allianz increased its UK rates by 35.3% during the same period.
“Personal-lines pricing is rising faster than commercial lines, based on Axa figures, as insurers play catch up with the cumulative effects of inflation. Yet Europe-wide price increases have diverged,” said Charles Graham, Senior Insurance Industry Analyst at BI.
“Allianz raised rates in the UK by 18.4% through 2023 before boosting Q1 pricing by 35.3%. Axa’s UK and Ireland prices jumped 31.5% for retail lines in 2023, then it pushed them up a whopping 51.7% in Q1. The magnitude of such rate increases dwarfs the rises in Germany, France, Italy, and Spain.”
BI highlights that Allianz’s decision to increase UK prices by 35.3% in Q1, following an average 18.4% rise throughout 2023, has been pivotal in maintaining profitability in its UK underwriting operations.
Despite facing similar inflationary pressures as Germany and France, where rate hikes were notably lower, Allianz achieved a 95.5% combined ratio in Q1, surpassing Germany’s 93% and France’s 90.3%.
Since early 2022, Allianz has maintained an average combined ratio of 97.4%, compared to France’s 94.8% and Germany’s 91.9%, exceeding 100% in only one quarter.
Graham further commented: “The challenge for European insurers remains how to keep pricing ahead of inflation. While commercial policies may include automatic indexation on long-term contracts to reflect inflation trends, the treatment of inflation for personal-lines pricing and particularly for motor varies by geographic region and is often dependent on individual insurers adjusting pricing in competitive markets.”
BI notes that in Germany, rates increased by 6.6% in 2023 and 7.6% in Q1, while in France, prices rose by 8.2% in 2023 and 9.6% in Q1. These hikes were considerably lower than those implemented by Allianz in the UK.
Allianz has significantly expanded its UK presence, acquiring full ownership of Liverpool Victoria (LV=) and Legal & General’s general insurance business in 2020. Additionally, through Pet Plan, Allianz has become the leading insurer for pets in the UK market.
