We all have seen the price hike for fuel, energy and food and these aren’t the only sectors we are seeing a growth in costs. It has been seen across sectors including the insurance market and is causing ongoing knock-on effects. In this article, I am going to talk about the insurance pricing lifecycle.
When an insurance company determines their premiums, some of the main factors they will be considering are the industry trends and price increases. Due to inflation, these insurance costs will keep increasing, leading to no cheap alternatives.
How does insurance pricing work?
Below is an image that explains how the insurance market circulates and goes through different stages:
High Premium – Cover becomes more challenging to find when premiums are heightened. This is because they need to increase their prices to keep the cost of their books profitable.
Decrease in premium claim ratio – After the high premiums, people begin to lower their prices again, and cover becomes more accessible. Because of the losses, they start to compete and accept business.
Lower premiums – The lower premiums affect the insurer’s profits, and they begin to increase premiums again so they don’t go out of business.
Increase in premium claim ratio – To remain profitable, they must continue increasing prices, returning us to the high premium mark again. And the cycle continues.
We at Winfield’s will do our best to scour the market to find the most competitive prices for you.