Figures compiled by Deloitte show that 2011 was the fourth consecutive year when home insurance premiums either met or exceeded the cost of claims and expenses.
Home insurers in 2011 posted a net combined ratio of 89%, which means the combined cost of claims and expenses was £89 for every £100 of net earned premium. This is a significant improvement on 2010 when the net combined ratio was 99%. In 2007, the last year to experience widespread flooding, the net combined ratio was 120%.
James Rakow, insurance partner at Deloitte, said: “At an industry level, the size of the home insurance market remains stable with annual premiums worth about £6.5bn, and 2011 was the fourth consecutive year when premiums met or exceeded claims and expenses. Profitability improved in 2011 because it was a relatively benign year for weather-related losses compared to 2010, when the insurance industry was hit hard by the extremely cold weather that Britain experienced in the December.
“The cost of claims arising from the floods that have swept across the country over the past few weeks will be the greatest since the 2007 flood losses, and will make insurers, reinsurers and other agencies look again at their flood models to check how well they predict the cost of flood claims. The full costs of the claims from this summer’s floods have yet to be assessed but previous experience has shown that widescale flooding can have a significant impact on the level of claims borne by insurance companies. In 2007 this pushed them into losses for their home insurance accounts.”
