2011 – Insurance and the changing world
Nigel Wellings
Whether its your car, home or farm business, almost everyone will have at least one insurance policy going into 2011. The U.K insurance industry is one of our largest exports, with our money, knowledge and expertise insuring everything from Oil Rigs and Spacecraft to Movie Stars and Skyscrapers. Consequently, the performance of our insurance companies is equally affected by world events as those in our own country. These can be slow changes such as trends, or sudden ones such as catastrophic events or changes to the law.
Trends that alter how an insurer trades can be varied from economics, meteorological predictions, social attitudes and motoring trends. Data from these can assist an insurer to calculate how much they are likely to pay in claims so they can judge what to charge their customers in premiums. Insurers also have to judge how much to reserve for catastrophic events that could cause serious claims and losses.
50 years ago an Insurer reserved funds for a couple of disasters every decade. Think back over the last ten years though and you will recall the number of natural disasters such as earthquakes and tsunamis, freak weather events such as flooding and tropical storms, terrorist attacks and pollution incidents. With the economic disaster of a recession where insurers’ investments are suffering combined with falsified claims from the public increasing, we are likely to see more premium rises.
We could also see an increase in policy exclusions. Some parts of the U.K are already excluded from having flood cover. If weather trends continued to worsen such restrictions could become more widespread. Young motorist accident trends have already caused meteoric price increases and serious consideration is being given to restricting their ability to drive at night.
2011 could therefore see some interesting changes to the general insurance market, with all companies hoping for a catastrophe free year.
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