Aviva hiking price of insurance cover further as cost of claims surges

Group chief executive Amanda Blanc told the PA news agency that the group has already had to increase prices by 5 per cent in the first quarter of 2023 with further price rises to come as inflation remains intense.

It comes as insurers across the sector have been impacted by surging motor repair, parts and labour prices, which have sent claims costs rocketing.

The industry has also been under pressure amid regulatory scrutiny on renewal rates and car damage valuations, while last year’s freezing weather and winter storms have also added to claims bills.

But Ms Blanc said she was “optimistic” that prices will start to come down.

“We are still putting price increases through,” she said.

“But we’re optimistic that prices will come down. New car prices are reducing and hopefully the supply chains will open up.”

In a sign of people cutting back amid the cost-of-living crisis, she said 30 per cent of new customers for its online-only self-service site Quotemehappy.com were choosing to buy its low-cost home and car insurance product that was launched last year, while others are dropping non-essential parts of their policies, such as windscreen cover.

The comments came as the group reported a 35 per cent surge in annual earnings despite the pressure on its UK general insurance arm.

The group reported operating profits of £2.2bn for 2022, up from £1.6bn in 2021. It revealed a 5 per cent fall in earnings at its UK and Ireland general insurance division, to £338m, as it was impacted by the rising cost of motor claims, increased payouts for severe weather and as claims began to return to pre-pandemic levels.

The firm’s move to increase prices meant that its personal lines business grew by just 2 per cent over the year.

It said cost-cutting actions had helped offset claims inflation, with overall “controllable” costs down £83m to £2.8bn, while its diversified business – which also spans Canada – had countered the UK general insurance woes.

Aviva, which has until recently been in the line of fire from an activist investor, offered a boost for shareholders with the launch of a £300 million share buyback, an increased final dividend payout and upgraded its dividend outlook.

Ms Blanc said: “We are making excellent progress at Aviva. Operating profits and dividends are growing and we have strong trading momentum despite significant market volatility. We have radically simplified Aviva, we are financially strong and we are utterly focused on transforming and growing the business.”

Matt Britzman, equity analyst at Hargreaves Lansdown, said: “Aviva’s the latest insurer to push through hefty hikes for its general insurance premiums, a trend expected to continue over 2023 as the cost to service claims has risen in this inflationary environment.”