Premiums: what 2010 will bring

Industry experts provide a snap insight into premium increases, trends and new developments for the next year.

Santam

Premium levels are under severe pressure with many of the major insurance companies posting underwriting losses. We believe many insurance companies will have premium increases equal to inflation or more.

Compass

Insurers need to be able to charge the right premium for the right risk. There are some pertinent factors to consider. Firstly, the increased cost of reinsurance, as the reinsurers become more demanding in terms of returns on capital. Secondly, insurers need to be less reliant on investment returns to generate returns for shareholders and focus on correct pricing for risk. Thirdly, I do not believe that premiums will decrease as sums insured decrease, as this will increase the likelihood of better rates being charged. - Russell Spring, Chief Underwriting Officer

ArtInsure

We expect increased activy in the fine arts sector, especially with the import and production of work focussed on the 2010 Soccer World Cup. This in turn gives rise to an increase in transport exposure, but we do not see a need for rate increases. - Gordon Massie, Managing Director

MUA

Insurers will be more selective as to the increases they apply, based more on the individual client's loss ratio performance, rather than the "shot gun" approach sometimes used in the past. However, obtaining meaningful motor premium increases will remain a challenge, especially as vehicle values continue to reduce whilst claims repair costs rise. - Leigh Friend, Regional Manager

Etana

In theory, premiums should start to increase as the market hardens as a result of underwriting losses. Poor investment returns and volatility in the stock market also increase the need for insurance companies to make an underwriting profit and therefore to increase rates or underwrite more scientifically. The pulling back of a major player like Swiss Re and some of the merger talks in the industry also put upward pressure on rates. Given the increase in crime, combined with increased cost of repairs in the motor industry, poorer public fire services and many other factors, the pressure is on to do everything we can in the industry to protect our clients through smart underwriting and tighter than ever risk management. Brokers need to search diligently for best deals and fight hard for their clients – and resist the easy way out of increased premiums. - Nash Omar, MD

Astra Maritime Underwriting Managers

The local marine market is overtraded at present, given that we estimate the annual premium income is roughly R 1 billion. Too much capacity has resulted in rates coming under pressure as new entities canvas for business. I do not believe rates will increase soon, given that Lloyds has just posted excellent profit figures for the first six months of this year. - Stephen Downie, Director

HIU

The soft market is turning. There is less reinsurance capacity and reinsurance terms are likely to be tougher. If reinsurance becomes more expensive, insurers will have to increase premiums. Recently released crime stats show an increase in business robberies (up 41%) and house robberies (up 26%) and this will impact on insurance premiums in the future.

Momentum STI

Provided recent spikes in theft claims stabilize we do not foresee premium increases in excess of inflation." Pieter Erasmus