In our last blog post we looked at the landscape of the insurance industry in 2014 and attempted to predict how insurance brokers would need to adapt their businesses in order to remain profitable during 2015. However, even though we are only a few weeks into 2015 there are already rumours that insurance premiums are on the rise for numerous types of protection including products created specifically for motorhomes and caravans.
As with many types of insurance products, motorhome insurance premiums fluctuate depending on the state of the economy as well as other contributing factors including fuel prices, the weather and political changes. This year is therefore set to be extremely turbulent for insurance brokers as not only is the General Election being held in May but the price of fuel is falling considerably and the UK economy is still in a state of flux.
Just this week the cost of a barrel of Brent crude oil fell to $47 – the lowest it has ever been in six years with some experts claiming that it could fall even further over the next few months. However, while some insurance brokers may be happy that the price of fuel is decreasing in reality it is a double-edged sword. For example, while cheaper fuel means motorists will have more money to spend on new vehicles and day trips, insurance premiums may rise as a consequence.
But why would falling fuel prices mean increasing insurance premiums? The simple answer is that cheaper fuel usually leads to more vehicles on the road as well as drivers being less economical which often means driving faster. Those previously looking to save money on fuel may now be inclined to use their vehicles more often which means that traffic could increase across the country. Furthermore, while on roads such as motorways drivers may be more tempted to drive at 70mph rather than 60mph as they can afford the waste in fuel – something that could inadvertently increase accident rates.
Stephen Jones from the analysts Towers Watson said: “Logically, insurers might expect more accidents and more claims [when the use of cars rises].” Motorhome insurers in particular will notice their businesses being affected by the price of fuel as owners may be tempted to take journeys on a more regular basis if the overall cost is lower. However, motorhomes and campervans are generally much more expensive than the average car which means that if they are more likely to be involved in an accident their premiums may subsequently increase.
As previously mentioned, it’s not just fuel prices that will affect the insurance markets in 2015 as the General Election will have widespread effects. Already we are seeing the main political parties advertising their manifestos and making promises to voters which could affect how they spend their money in the future. Back when the recession first hit many motorhome insurance brokers saw the amount of leads they were receiving fall due to consumers choosing to save their money for other purchases. In the lead up to the General Election we could see something similar if the public become concerned that their money won’t stretch as far under a new political party.
However, it’s not all bad news for insurance brokers. A change in the markets can sometimes shake up the economy and encourage optimism among the public which in turn leads to further spending. For example, it has recently been announced that inflation was only 0.5% in December, meaning that consumers now have more money to spend on goods and services. However, much like the fall in fuel costs some are claiming that this is not all good news as if deflation continues unchecked the economy would eventually stall as not enough money would be reinvested by consumers. High value items such as motorhomes and campervans would therefore cost much less – meaning that insurance premiums will also take a hit.
So what will happen to insurance premiums in 2015? In a nutshell, it all depends on the economic and political changes which we can just about see on the horizon. Falling fuel costs, the General Election and fluctuations in the UK economy should therefore be three things that all insurance brokers keep a keen eye on over the next few months in order to give them valuable insight into consumer behaviour.