What a difference a year makes. Few would’ve predicted the havoc that the Coronavirus pandemic would have had on all industries in 2020. But what can we expect for 2021 when it comes to the insurance industry?
The closest thing we have to a ‘crystal ball’ is SchemeServe’s Index, which reveals the most profitable schemes business for brokers.
So far, 2021 started off much in the same way that 2020 began a few months in – in full lockdown with families working and homeschooling at the same time.
If this situation were to play out for most of the year, then a continuation of the most profitable schemes for the majority of the year could be expected with perhaps some differences in the last two quarters of 2021 when everything starts to re-open.
Security
One of the biggest concerns during lockdown has been the security of property and assets. Just this week, security experts have warned that there’ll be a likely rise in property damage during this period of extended lockdown as both organised and opportunistic criminals exploit the quieter streets and commercial estates.
It means that up and down the country property owners and facility managers are taking extra measures to manage the risks, particularly when it comes to vacant premises.
This is why it’s hardly surprising that between April and September last year per policy residential property owners’ was by far the biggest earner over the period. It delivered the highest levels of commission as a percentage of premium, with first premium commissions at 17% and renewal commission rate of 22%.
There were two other products that exceeded 20% commission at renewal – commercial property owners’ insurance, which saw commission renewal skyrocket to 21% up from 9% at first premium and SME packages which saw a jump from 18% commission at first premium to 21% at renewal.
With people spending more time working in their homes, many have turned to pet ownership for companionship and comfort. The number of first premiums for pet insurance rose 217%, but whether this trend will continue is uncertain.
There already, after all, reports of people returning pets to shelters and with furlough potentially ending in March this could result in even more pets being given up.
Impact on event insurance
With major events cancelled in 2020, it’s no surprise that premiums for event insurance skyrocketed from £92 for the first premium to a whopping £804 at renewal. With so much uncertainty and cancellations that could disrupt everything at a moment’s notice the risk is just too great in this particular sector.
But has the industry priced themselves out of the market entirely? Just this week there were calls for the government to underwrite events. A letter was sent by the DCMS committee chair Julian Knight and signed by the group’s members urging the Chancellor Rishi Sunak to help other creatives like it did for the film and television industry, which cost the tax payer £500 million.
Hospitality and travel
There’s still a lot of reluctance to spend money on holidays. According to the AA more than half of Brits (54%) are waiting to see how the pandemic ends before committing to a sun or ski trip.
SchemeServe’s Index confirms that people are reluctant for an overseas trip. It shows that where brokers are seeing new business volumes increase is in the caravan and trailer policies (up by 255%). For now, it seems, the nation appears more comfortable investing in staycations until the pandemic is controlled by the vaccination roll out.
Pubs and clubs business has also seen an increase between the average first premium and renewal from £3,763 to £4,059.
But there’s trouble brewing for this sector of the insurance industry. Just this week it was announced that the UK’s High Court upheld its judgement in favour of policyholders of business interruption claims. It means the Supreme Court has found in favour of businesses who were denied pay-outs due to losses from Covid-19.
It doesn’t mean, of course, that all BI claims will be guaranteed a pay-out as cases aren’t always clear cut. But we won’t need a crystal ball to say that many policies will need to get reviewed with many seeking legal advice if there’s still sticking points.
There will be much uncertainty in the months ahead. But our next SchemeServe Index should offer more clarity and some indication on where the industry is heading in the second quarter of 2021.
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