Foreword

Market Pressures and Opportunities: Understanding Insurance Trends in the UK

This year marks the third edition of our annual whitepaper, a comprehensive exploration of insights from insurers across the globe. Each edition of this report reflects the collaborative effort of our survey respondents, whose unique perspectives have greatly enhanced our understanding of the industry. We extend our sincere gratitude to all participants for their contributions, which help illuminate the challenges and opportunities shaping the global insurance landscape.

The insurance sector is currently experiencing diverse and complex market pressures, with conditions varying significantly by region. In the UK, we’re seeing a tightening market shaped by economic factors and competitive dynamics. More than 80% of survey respondents from the region reported increased costs of reinsurance, while over three-quarters believe that these challenges are also driving higher claims costs, which ultimately lead to increased premiums.

However, the increased cost of reinsurance and rising claims costs are only part of a larger puzzle. Additional drivers, such as social inflation, regulatory shifts, climate change, and the frequency of natural disasters, have also contributed to premium increases in the market. While the driving factors are similar, regional nuances have shaped different outcomes across the globe.

The third quarter of 2024 saw the UK property insurance rates decrease while the casualty rates increased due to auto liability. There are several reasons for this increase in casualty rates: higher cost of care for those injured in automobile accidents, greater vehicle and replacement part costs, and a rise in jury damages, including exorbitant court awards that greatly impact the insurers’ loss ratios.

Current market conditions are leading insurers to actively optimise strategies to manage costs and maintain profitability. Efforts to enhance operational efficiency and embrace innovative solutions are at the forefront, helping mitigate the financial impact of rising claims.

In the UK, insurers are employing several key strategies, with premium adjustments being the most common approach by nearly two-thirds of respondents. Additionally, there is a strong focus on technology investment, enhanced claims management, and the implementation of stricter underwriting guidelines. Many UK insurers are also closely monitoring credit rating agencies for potential downgrades or negative outlooks, which could influence market strategies and competitive positioning. With global credit reporting agencies anticipating that these challenges will persist in the reinsurance market, insurers may benefit from paying close attention to the effects on the entire supply chain.

While most survey participants foresee a moderate hardening of the UK insurance market, insurers continue to have opportunities to differentiate themselves. Looking ahead, advancements in data analytics, cyber security, and artificial intelligence will enable insurers to stand out in a competitive market. However, capitalising on these will require significant investment.

Furthermore, the new Labour government’s heightened scrutiny of insurers’ pricing and customer fairness signals a challenging period ahead for UK insurers. As the spotlight shifts from motor insurance to household property lines, with other sectors soon to follow, we can expect conditions to tighten in the wake of reduced suppliers as some insurers exit the market. Such a scenario presents both challenges and opportunities. With the Consumer Duty legislation already in place, insurers face added pressure to optimise operations and improve customer service to avoid the prospect of reputational damage or regulatory fines for poor service delivery. To enhance the return on investment, insurers may look to a trusted advisor with a deep understanding of the evolving nature of global challenges and technological innovations.

Gallagher Bassett (GB) can provide insurers with critical support, whether through streamlining processes, enhancing claims capabilities, or providing guidance on optimising the workforce. Our dedicated Carrier Practice model is designed to maximise our ability to partner with insurers by offering a cross-functional team entirely focused on achieving specific targets and goals, supporting managing general agents (MGAs), programme administrators, captives, and alternative risk managers. Additionally, our expertise in AI and our commitment to advancing machine learning through our Waypoint product suite empower us – and our partners – to capitalise on the latest benefits of generative AI. As technological advancements reshape the industry, GB is well-placed to help insurers adapt quickly to whatever comes their way.

Our experienced professionals take a proactive approach to managing risks, resolving claims, and optimising outcomes by focusing on resiliency and efficiency. This enables insurers to stay ahead of the competition now and in the years ahead.