The insurance market in the UK is experiencing significant upheaval as Allianz and AXA, two global insurers, implement substantial rate hikes, according to a recent report by Bloomberg Intelligence (BI), a provider of financial analysis and research.
Compared to other European markets, the price increases for personal lines in the UK and Ireland are notably higher, suggesting a more severe crisis and disruption in these regions.
AXA raised its prices by 51.7% in Q1, aiming to enhance the performance of its motor insurance portfolio. Similarly, Allianz, increased its UK rates by 35.3% during the same period.
Charles Graham, BI Senior Insurance Industry Analyst, commented: “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.”
“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 1Q. The magnitude of such rate increases dwarfs the rises in Germany, France, Italy and Spain.”
Allianz’s decision to increase UK prices by 35.3% in Q1, following an average 18.4% rise throughout 2023, has proven pivotal in maintaining profitability in its UK underwriting operations, according to BI.
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 the beginning of 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 added: “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.
Expanding its UK presence significantly, Allianz acquired 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.
