Rainy outlook for home insurance market

The UK home insurance market will scrape a profit in 2020, largely due to the fall in claims following the outbreak of COVID-19.

Consultancy EY said the market had been hit by losses from February, which was the wettest month on record. Despite this, it said claims inflation had fallen by 2.7% driven by more people staying at home during the pandemic.

EY is forecasting a net combined ratio of 99.2% for 2020, which is flat year on year and better than the 106.1% recorded for 2018.

In 2021, EY expects the market to make a loss and post a net combined ratio of 102%.

Tony Sault, UK general insurance leader at EY, commented: “While it is good news that the home insurance sector will achieve profitability this year, which it has done for almost all of the last decade, severe weather and property damage claims are really challenging the market. Coupled with the costs related to the regulator’s pricing review, it is almost certain that the sector will enter the red in 2021.”

He added: “COVID-19 lockdowns have altered recent claims patterns, and this year’s results will be unique to any other year. Through lockdown, as people have spent a lot of time in their homes, there has been a reduction in water damage claims due to households responding quickly to leaks, and a dramatic drop in claims relating to home break-ins and theft.”

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