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Highlights
- Insurance firms in the UK will no longer be allowed to charge a higher renewal premium from their loyal consumers.
- The new regulation is expected to benefit the individuals who stick with one insurance provider.
The new year is set to bring good news for insurance customers in the United Kingdom. Insurance firms in the UK will no longer be allowed to charge a higher renewal premium from their loyal consumers. Financial regulator, The Financial Conduct Authority (FCA), introduced the new rule for the renewal of motor and home insurance after it found that many companies were using the “Price Walking” strategy wherein the firms were offering cheap deals to attract new customers and later on charging higher renewal premium.
The new rule will kick in from 1 January 2022. In addition, the new changes will allow the consumers to cancel their automatic renewal of policy easily. Moreover, the FCA’s new rules require the insurance firms to show how their product provides a fair value to their customers. The financial regulator expects new rule changes will lead to savings of £4.2 billion over the next ten years for the consumers.
The new regulation is expected to benefit the individuals who stick with one insurance provider and make the insurance market fairer for the consumers. However, it also means the end of cheap deals from insurance companies.
Let us explore some FTSE listed insurance stocks and see how they are faring.
Admiral Group Plc (LON: ADM)
FTSE100 listed company offers car insurance in the UK and other European countries. It also provides car finance services and underwrites the car, household, and other vehicles.
The company’s UK business reported significant growth and was profitable in the first half of 2021. The UK customer base of the insurance firm rose by 12% to 6.22 million during the period. It insured 4.93 million vehicles and 1.23 million households. As a result, the overall net revenue was at £0.79 billion, with the UK business reporting a profit before tax of £543.5 million. The new rule change in the UK might impact the company’s revenue.
Admiral Group Plc’s shares were hovering at GBX 3,155, up by 0.16% at 9:31 AM BST with a market cap of £9,271 million as of 30 December 2021.
Direct Line Insurance Group Plc (LON: DLG)
The general insurance company offers underwriting for motor, homes, and travel-related segments. It has the main operation in the United Kingdom.
In the first nine months of 2021, the company reported a gross written premium of £2,413.6 million. The motor and home insurance contributed over 50% to premium, with a total number of in-force policies at 14,410. The company’s management expects to achieve a medium-term operating ratio of 93% to 95%.
Direct Line Insurance Group Plc’s shares were hovering at GBX 279.80 at 9:32 AM BST, down by 0.29% with a market cap of £3,716 million as of 30 December 2021.
Hiscox Ltd (LON: HSX)
The company has operations in over 14 countries, offering a range of insurance products to retail and business clients.
It reported a gross premium of USD 3,462.9 million, a rise of 6.1% in the first nine months of 2021. The company reported an increase in business claims during the period as it made final or interim payments to over 5,153 clients.
Hiscox Ltd’s shares were hovering at GBX 866 at 9:33 AM BST, up by 0.21% with a market cap of £2,943 million as of 30 December 2021.
