The UK insurance sector is predicted to experience steady but slowing growth in premium income over the next three years as economic conditions stabilise and premium rises ease, according to the latest EY ITEM Club Outlook for Financial Services.
The forecast anticipates a return to more normal premium increase levels, averaging around 3.4%, similar to the period between 2010 and 2019, after a period of sharp rises.
Driven by stabilising economic conditions, falling interest rates, and easing cost pressures, premium growth for non-life insurance is expected to be 5.2% in 2025, down from 8.4% in 2024.
Growth is then projected to further moderate to 4.3% in 2026 and 3.6% in 2027.
Life insurance premiums are also expected to see a similar trend, with growth of 4.4% in 2025 (down from 5.8% in 2024), followed by 3.3% in 2026 and 3.7% in 2027.
The report suggests that increased demand for non-life products like home and motor insurance will be fuelled by an improving housing market and real income gains for UK households.
Additionally, the easing of supply chain issues, which previously drove up replacement part costs, will also allow insurers to moderate premium increases.
As a result, income from non-life insurance premium growth is forecast to grow 5.2% in 2025 (down from 8.4% in 2024) 4.3% in 2026 and 3.6% in 2027.
For life insurance, growth will be driven by stable consumer demand and a growing UK workforce, leading to increased workplace pension uptake.
However, analysts warn that an expected slowdown in household disposable income growth could impact the sector.
Martina Neary, EY UK Insurance Leader, commented: “The UK’s economic recovery is encouraging for both UK insurers and their customers, and the insurance sector is set for steady growth over the coming years.
“Falling interest rates and stabilising inflation will play a crucial role in easing consumer caution and driving demand for both general and life insurance products in the year ahead, and while premium growth is expected to be moderate this year, the market remains resilient.”
She added: “That said, ongoing geopolitical uncertainty and unpredictable weather patterns pose potential risks to the growth outlook. As ever, UK insurers will need to continue to strike a careful balance between managing costs, making strategic adjustments in line with market changes, supporting their customers – particularly the most vulnerable – and exploring new avenues for sustainable growth and innovation.”
The post UK insurance premium growth forecast to stabilise over next three years: EY appeared first on ReinsuranceNe.ws.