Best’s News & Research Service - January 04, 2022 07:58 AM (EST)
Best's Commentary: Brand Profile and Pricing Models in Focus as UK Insurers Adjust to New FCA Rules
- January 04, 2022 07:58 AM (EST)
Oldwick //BestWire// - New pricing rules for U.K. personal motor and household insurers, which came into force on 1 January 2022, should not have a significant impact on the credit fundamentals of market participants, according to new AM Best commentary.
However, the Best’s Commentary, “Brand Profile and Pricing Models in Focus as UK Insurers Adjust to New FCA Rules”, notes that the U.K. personal lines insurance market is highly competitive, and so there is a risk that in the early stages of adoption, competition will erode the ability of companies to increase new business pricing sufficiently to absorb lost renewal price increases.
The new rules are expected to stop the practice of attracting new customers through new business discounts, and then recouping profits through price increases on renewal. While they have been largely welcomed by insurers, many market participants have voiced concerns about the complexity of implementing them.
AM Best believes larger groups, with diversified income streams, and those with more sophisticated pricing models that can respond quickly to changing market dynamics, should be best positioned to absorb these changes.
The commentary goes on to state that while there is uncertainty surrounding the impact on technical margins in the early stages of adoption, AM Best expects the overall profitability of the market, including ancillary income, to remain healthy.
To access a complimentary copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=316330 .
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.