Inflation has taken the world by storm over the past two years, leaving consumers and central banks feeling the pinch. But like most other goods and services, inflation can also increase the cost of insurance.
Why are insurance premiums going up? The key takeaways:
- Rising inflation levels has led to growing costs for insurers meaning insurance premiums have gone up.
- All premiums including car insurance and home insurance have been affected.
- The main causes of insurance inflation are supply chain issues, rising labour costs, staff shortages and severe weather events which has influenced claims costs.
- The value of your assets may have increased – we advise you get them valued accurately, if you haven’t already.
The impact of inflation on insurance
In this article, we will delve into the factors that have affected inflation and thus influenced insurance premiums, in addition to how you can protect your assets against inflation.
You’re probably thinking are insurance premiums going up, and you’re right to think that. The key thing to remember is: as inflation rises, so do insurance premiums.
This rise of insurance premiums can be attributed to increasing inflation, which has led to growing costs for insurance companies. With repair costs and claim amounts soaring, the inflation effects on the insurance industry is clear: it means the insurers have no choice but to up their premiums to keep pace.
The Consumer Price Index (CPI) is the official measure of inflation in consumer prices in the UK. In 2022, this jumped to over 10% in 2022 – the highest level in 40 years – and it currently stands at 6.3%, according to the Office for National Statistics as of October 2023. Inflation levels have gone through the roof, there’s no denying that, but it’s promising to see the figure easing with grocery inflation back in single digits for the first time in 16 months.
Home insurance inflation: Why have home insurance premiums gone up?
The UK home insurance market experienced the worst performing year on record in 2022 for insurers, with supply chain difficulties driving up construction and transportation costs for damaged homes. This makes rebuilds much more costly, and the frequency and severity of major weather events only drives up claim costs for insurers, therefore home insurance premiums are affected and go up.