Only a few of years ago, a decision by the Bank of England’s Monetary Policy Committee not to raise interest rates would barely have generated a murmur.
The economy seemed stable and whilst interest rates may have confounded the future plans of savers to a degree, they conversely meant that things like mortgage repayments were affordable.
That, of course, was before the first impacts of Brexit began to be felt and in advance of the Covid-19 pandemic and the war in Ukraine.
So, this week’s narrow vote in favour of leaving interest rates on hold for the first time since November 2021 has been greeted with a sigh of relief.
In announcing the result of its latest deliberations, the Bank has described the current level of rates as “restrictive”.
That is one way of putting things.
What the UK has experienced in recent years is, according to a number of public, private and third sector organisations, nothing short of a “cost of living crisis”.
The situation has had a variety of consequences for businesses and households alike.
Across the financial services sector, it has led to what is known as a ‘hard market’. When it comes to insurance, that is defined as being when premiums increase, coverage terms are restricted and capacity or availability of certain types of cover are either reduced or withdrawn altogether.
That has come about, in part, due to circumstances highlighted by the Association of British Insurers (ABI) in recent days.
The ABI has outlined how – between April and June – some £8.6 million was paid out on average every day to settle claims.
One of the notable factors was subsidence, which prompted a 21 per cent increase in payouts during the quarter.
As my colleague Joe Hooper wrote in June, subsidence claims are now a massive problem and were being made on average every 15 minutes during the second half of 2022.
With the value of home insurance payouts rising faster than the sums received in premiums, it should perhaps not come as too much of a surprise that the cost of insurance is going up.
I should point out that there are reasons why the £782 million paid out by insurers during the quarter in question translates to higher costs for consumers and companies.
As figures published by the Department for Business and Trade a fortnight ago illustrate, the cost of materials for new-build projects and repairs has increased by 39 per cent in the last five years.
Policyholders might feel that they simply have to grin and bear it as insurers dig in their heels when it comes to the price of new or renewed cover.
However, this is the time, I would suggest, when brokers come into their own.
Our role is to act as skilled advisors, liaising with clients and insurance underwriters to determine the most appropriate cover.
Together with my Broadway colleagues, I’m very well aware of what that means at the moment, including having to provide more detail on a more frequent basis to secure policies which are not only tailored to a client’s needs but at the most competitive rates available.
In practice, that means ensuring that cover remains right for their circumstances.
Have, for instance, certain assets which might have been included in previous years been sold? Has a business been restructured? Both of those things can influence the nature – and cost – of insurance.
Conducting such analysis in advance of a policy renewal date can lead to elements which are no longer necessary being stripped out – and, therefore, a reduction on premiums.
Good brokers are able to do so without running the risk of underinsurance: leaving someone without cover when they might need it most.
It is good practice to make periodic reviews of insurance anyway. When the market is hard and even wealthy individuals are looking to make savings, it’s arguably more important.
Written by Lauren Winstanley, Private Clients Executive