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Fitch Ratings on why its sector outlook for UK non-life insurers remains negative

Fitch Ratings on why its sector outlook for UK non-life insurers remains negative | Insurance Business

Fitch Ratings on why its sector outlook for UK non-life insurers remains negative

A credit rating agency is keeping its negative sector outlook for non-life insurers in the UK, and here we tell you why.

Fitch Ratings has offered insights on what could result in rating downgrades for UK motor insurers, as well as the struggles being faced by the household insurance sector. Drawing particular attention to motor insurance, it cited woes involving claims and premium rates.

Profit margins, for instance, are expected to remain under pressure as providers find it hard to raise premium rates to keep up with increased claims costs.

“It is difficult to put up prices without losing business as the market is crowded and motor insurance is highly price-sensitive in the UK,” explained Fitch Ratings.

“However, several insurers emphasised their focus on defending profitability rather than market share, when recently unveiling their 2018 results. Prioritising market share at the expense of profitability could lead to rating downgrades.”

Culprits include higher claims from credit hire companies and a surge in car theft claims costs, with the latter partly attributed to the growing popularity of keyless cars.

“Some of these appear to be vulnerable to hacking and therefore more susceptible to theft,” noted the credit rating agency. “These vehicles are typically more expensive to replace as they tend to be equipped with more expensive technology than vehicles with a traditional key and ignition system.”


Fitch Ratings’ assertion is corroborated by Thatcham Research, which yesterday rolled out consumer security ratings aimed at bringing potential keyless entry/start vulnerabilities to light.

“Car thieves have been having a field day lately,” commented Laurenz Gerger, policy adviser for motor insurance at the Association of British Insurers. “Crime stats show vehicle thefts at their highest level for a decade. Insurers paid out a record £376 million for car theft in 2018, which was partly driven by the vulnerability of some cars to keyless relay theft.

“Making these assessments public should spur motor manufacturers to take swift action to tackle this high-tech vulnerability. Meantime, consumers deserve to know how secure their cars are so they can take the necessary steps to reduce the likelihood that they become victims of crime.”

As for what lies ahead for home and auto insurers, here’s what Fitch Ratings had to say: “Our sector outlook for UK non-life insurers as a whole is still negative, as rising claim costs, competition, and regulatory scrutiny continue to threaten motor insurers’ profit margins and the household insurance sector is also struggling to defend profitability in the face of intense competition.

“However, our ratings across the sector all have a stable outlook, reflecting rated companies’ resilience to market pressure given their strong capitalisation and well-diversified business profiles.”