The boss of insurer Aviva has warned that insurance costs will rise further this year after double-digit growth in 2022 as it faces rising costs on repair bills.
Aviva increased insurance new business premiums by an average of 20% for motor insurance and 13% for home insurance as the cost of claims increased from 9% to 11% last year.
The group’s chief executive, Amanda Blanc, told the PA news agency that the group was forced to raise prices by 5% in the first quarter of 2023, with further price rises expected as inflation picks up.
It comes as insurers across all sectors have been hit by rising motor repair, parts and labor prices, which have pushed up the cost of claims.
The industry has come under pressure amid regulatory scrutiny over renewal rates and car damage assessments, while last year’s freezing weather and winter storms also added to the claims bill.
But Ms. Blanc said she was “optimistic” that prices would begin to fall.
“We’re still going to let prices go up,” he said.
“But we are optimistic that prices will decrease. I hope the price of new cars will come down and the supply chain will open up.”
In a sign that customers are shrinking amid the cost-of-living crisis, he said 30% of policyholders opted to buy cheaper home and car insurance products launched last year, while others were ditching their non-essentials. policies such as glass cover.
The comments came as the group reported a 35% rise in annual revenue despite pressure on its UK general insurance division.
The group reported operating profits of £1.6bn in 2021 to £2.2bn in 2022.
It revealed a 5% drop in income at its general insurance divisions in the UK and Ireland, to £338m, as it was hit by higher motor claims costs, higher bad weather payouts and claims returning to pre-pandemic levels. .
The firm’s price hikes meant its own business grew by just 2% in the year.
It said cost-cutting measures helped offset inflation, with total “controllable” costs falling by £83m to £2.8bn, while its diversified business, which includes Canada, countered UK general insurance issues.
Until recently under the fire of an activist investor, Aviva proposed a £300m share buyback to shareholders, increased final dividend payments and improved dividend forecasts.
Ms Blanc said: “We are making great progress at Aviva.
“Operating income and dividends are growing and we have strong trading momentum despite significant market volatility.
“We have fundamentally simplified Aviva, we are financially strong and we are fully focused on transforming and growing the business.”