UK home insurers report second consecutive loss-making year in 2023

• A loss-making 118% Net Combined Ratio (NCR) was recorded over 2023 – a marginal improvement on record loss-making in 2022 (122% NCR) – driven by supply chain pressures, high inflation and claims frequency
• For every £1 in consumer premiums, UK home insurers paid out £1.18 in claims and expenses in 2023
• Market challenges are expected to remain this year, resulting in further loss-making forecast in 2024 (108% NCR)
• Consumer premium prices are set to rise 19% in 2024 (£49 per policy on average), and 7% in 2025 (£21 per policy on average) 

UK home insurers remained in the red in 2023, only marginally improving on record losses in 2022, according to EY’s latest UK Home Results Analysis. A loss-making Net Combined Ratio (NCR) of 118% was recorded in 2023 – a slight uptick on 2022’s 122% NCR – with further losses forecast in 2024 as headwinds persist. As a result, consumer premiums are expected to rise further over the next two years. 

Despite fewer than average major weather events UK home insurers’ balance sheets were still heavily challenged in 2023, due to ongoing supply chain pressures, increased claims frequency and high inflation. Over the course of the year, for every £1 in consumer premiums, EY estimates UK home insurers paid out £1.18 in claims and expenses.

These pressures are expected to persist – albeit to a lesser degree – this year, and the forecast for 2024 remains loss-making with an NCR of 108%. Provided market conditions continue to ease and weather events remain at average levels, firms are expected to record an NCR of 100% in 2025.  

Matthew Wheatley, UK General Insurance Partner at EY, comments: “It was another challenging year for the UK home insurance industry in 2023. Although inflation began to ease last year, claims frequency was high and supply chain issues remained, meaning firms faced another year of significant losses and will have to pass some costs on to the customer. We expect firms to get closer to profitability over the course of 2024 and 2025, providing inflation continues to stabilise.” 

Home insurance premiums set to rise by a fifth this year

Market pressures are expected to continue to impact consumer premiums, and EY forecasts the average written premiums will increase by 19% in 2024 (adding £49 to an average policy), with a further 7% increase forecast in 2025 (adding another £21 on average per policy).

Martina Neary, UK Insurance Leader at EY, concludes: “Many UK home insurers delayed raising premiums in line with inflation in 2022 to maintain competitiveness in the wake of the FCA’s pricing reforms. This drove a sharp rise in premiums in 2023 and is expected to continue in 2024 as firms navigate persistent high inflation and supply chain challenges. 

“2024 will ultimately be another difficult year for both firms and for customers. Firms will need to carefully balance a range of challenges, from supporting customers facing financial difficulty, to investing in critical growth areas such as digital transformation and navigating uncertainty around climate change.”