As insurance premiums rise be sure to take the right advice from an independent broker

Car, commercial, cyber… in a fast-changing market you can rely on Cowens for the right advice.

It’s hard to turn on the TV or radio recently without hearing reference to the cost of living crisis.. and, for consumers, car insurance is the latest household bill to soar.

The Office for National Statistics (ONS) reported that the average price of car insurance rose 43.1% in the 12 months to June 2023, whilst some motorists with policies up for renewal were dismayed to find prices rocketing by as much as 70%.

Yet the Association of British Insurers quarterly motor insurance premium tracker tells a slightly less alarming story. The average price paid for motor insurance in the first three months of 2023 was £478 – only 16% higher than 2022. Whilst the latter half of the year is likely to see this rise, it’s still not as dramatic as the ONS suggests because the figures track different things. The ONS data is based on insurance quotes, whilst the ABI looks at the prices people actually pay for both new and renewed policies.

Why is motor insurance so expensive?
Naturally the same issues apply to commercial and fleet vehicle insurance but there seems to be no easy solution for insurers, whose own costs have risen as a result of a range of circumstances. Margins have been squeezed by the rise in the cost of second hand cars during the Covid pandemic, by higher wages across the car maintenance sector and especially by a shortage of spare parts, such as microchips and semiconductors. With global supply chains disrupted by the war in Ukraine and unease in China and the Middle East, not only are these more expensive but take longer to arrive, resulting in cars being out of action for longer following a claim, so claimants need courtesy cars for longer. Meanwhile electric cars are more expensive to repair than gas-driven vehicles.

High renewal quotes across the board highlight the importance of shopping around. As that differing data shows, whilst renewal quotes can be stratospheric, it’s possible to find insurance deals that are easier on your pocket, with the help of an independent broker like Cowens.

Making savings on insurance puts individuals and businesses at risk
An increase in premiums and a decrease in confidence isn’t restricted to vehicles. Forecasts suggest that falling household incomes and an uncertain housing market will lead more people to re-evaluate their finances across the board, potentially leading to reduced demand for home and contents insurance and to consumers potentially choosing to pause or reduce paying into protection cover such as life insurance. Yet it is vital that neither individuals nor businesses skimp on these essential indemnities.

Insurance offers security in a changing world
Fortunately whilst commercial property insurance has also seen a rise in premiums (for the 23rd consecutive quarter as reported by the Council of Insurance Agents & Brokers) there has been less of a corresponding shift in demand, with business owners prepared to pay for protection in the face of escalating property values and the risk of natural catastrophes. For businesses, large or small, change is accelerating possibly at a faster pace than at any time in history with shifts in climate, technology (not least AI) and customer expectations, combined with global and political volatility, encouraging enterprises to transform their infrastructure, products, business models and cultures in order to survive. Insurance has the potential to act as a safety net in the face of those changes, providing a backstop against innumerable risks. It is important to not only react to risks but implement processes and policies aimed at mitigating risk and preventing losses – again considerations best discussed with an expert broker.

Don’t skimp on cyber insurance
One area which is seeing rapid growth (but happily where premiums have seen less of an increase) is cyber protection. As businesses rely increasingly on digital data to maintain productivity and security and improve sales, it is vital that they protect themselves from undesirable events such as corrupted or lost data or criminal acts like data breaches. This is particularly true for businesses that store personal information about their clients. Unfortunately with growing investment in online presence and ecommerce activity there is commensurate growth in the number of cyber attacks on online businesses. Cyber criminals can steal your funds, impersonate your business and trick your employees into transferring funds or merchandise to them. A cyber attack can also cause physical damage to your business equipment, for example broken computers and malfunctioning servers, so UK businesses will need more and robust cyber liability insurance to ensure they are fully protected.

What can you do to reduce risk – and premiums?
The insurance industry finds itself in a hard market thanks to the knock-on effect of global natural disasters and the residual effect of the economic downturn. In that situation underwriters look more closely at losses, safety records and financials so it’s fundamental that businesses of all sizes are assured that risk management and safety programmes are reviewed and in place. Since many insurers also conduct credit checks it’s wise to pay invoices on time and keep your company’s financial records in order, to ensure you are not flagged as a risk.

Businesses (and individuals) should also start any renewal processes early – and shop around! By using a reliable independent insurance broker like Cowens to source a suitable and comprehensive package to suit your specific needs, you can ensure you are covered against potential losses – and look to the future with confidence.