UK insurers are expected to report steady but slowing growth in premium income over the next three years, as the economic recovery deepens and consumer premium increases return to closer the average level of 3.4% (as recorded between 2010 and 2019), according to the latest EY ITEM Club Outlook for Financial Services.
Following a period of sharp premium increases driven by cost pressures over the past two years, UK insurance premium growth is expected to stabilise as interest rates continue to fall and costs ease.
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, and income from life insurance premiums is forecast to grow 4.4% in 2025 (from 5.8% in 2024), 3.3% in 2026 and 3.7% in 2027.
As the housing market opens up and UK households benefit from real income gains during the last year, demand for non-life products such as home and motor insurance is expected to rise.
At the same time, supply chain issues that had led to high replacement part costs for goods such as washing machines or car replacement parts have eased, meaning firms are now more able to lower the rate at which premiums are raised.
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.
Consumer demand for life insurance policies remains stable, and alongside the growing UK workforce – which will increase the number of workplace pensions – the uptake of policies is expected to increase this year. However, the EY ITEM Club warns that an expected slowdown in the growth of household disposable income in the year ahead may affect overall growth levels in the life insurance sector. As a result, income from life insurance premiums is forecast to grow 4.4% in 2025 (down from 5.8% in 2024), 3.3% in 2026 and 3.7% in 2027.
Martina Neary, EY UK Insurance Leader, said, “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.
“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.”
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