The cost of home and motor insurance could fall in 2021 amid changing regulations in the sector, according to new predictions from PwC.
A change in regulation, as well as the ongoing pandemic, could have an impact on the cost of general insurance, causing “significant” downward pressure on premium rates across both personal and commercial lines, according to the firm.
For personal motor insurance, PwC believes the current lockdown will continue the trend of lower than expected crashes on the road, particularly as recent government figures suggest that road usage has been 50% of normal levels so far this year.
Meanwhile, competition in the home insurance market continues to increase as many insurers look to grow in this segment, after there was a reduction in some home claims, particularly theft, in 2020.
Based on the increased competition between insurers to grow and the impact of the pandemic, PwC now estimates that in 2021, for customers who shop around, motor insurance premiums will fall by 5% to 10% and home insurance premiums will fall by 4% to 8%.
In addition, new regulation from the Financial Conduct Authority (FCA) is expected to be introduced in late 2021 or early 2022. The new rules will require motor and home insurance prices to be the same for both new customers and those renewing.
Discounts on new business were traditionally funded by increased pricing on renewal. Under the new regulations, those that already shop around may see price increases, whilst those that have remained with an insurer for a number of years may see price drops.
Mohammad Khan, general insurance leader at PwC UK, said: “For 2021, due to the economic impact of the pandemic and competition in the home and motor market, we are forecasting insurance premiums to drop by 5% – 10% for those who shop around for motor insurance and 4% – 8% for those who shop around for home insurance.
“Conversely, there may be greater reductions in renewal premiums for customers who have stayed with an insurer for a number of years. However, these estimates exclude the impact of the FCA reforms which may not be introduced in 2021.”
He added: “If the reforms on market pricing are introduced in 2021, the cost of the reduction in renewal premiums for customers who have stayed with an insurer for a number of years may be borne by those customers who use price comparison websites. This is because the renewal reduction will be funded by the abolition of discounts that are currently available to drivers who shop around each year.
“As we go deeper into 2021, the economic impact due to the pandemic, especially on smaller businesses, who may have been relying on furlough payments and government loans, will force SMEs to decide whether insurance is necessary. This will then no doubt have a significant impact on commercial insurers targeting this sector and the price rises they are able to achieve.”