Home insurers across the United Kingdom are preparing for a challenging 2026, with underwriting losses predicted as a fierce market battle drives premiums down for consumers.
A Profitable 2025 Against the Odds
Exclusive data from Deloitte, shared with City AM, indicates that the sector is on course to finish 2025 in the black. The forecast net combined ratio (NCR) for the year is 98 per cent. This key metric means that for every £1 collected in premiums, insurers will pay out 98p in claims and associated expenses.
This result is notable given the significant headwinds the industry has faced. Providers have contended with persistently high inflation, ongoing supply chain disruptions, and a surge in costly claims linked to extreme weather events, including storms Babet and Ciaran. The financial toll has been substantial, with £1.6bn paid out in property claims during the second quarter of 2025 alone, and a total of £4.6bn in the first nine months of the year.
Competition Drives Premiums Down for Homeowners
Despite these pressures, the average annual premium has held relatively steady in 2025, dipping slightly to £326 from £329 in 2024. However, Deloitte's analysis points to a more significant shift next year.
The consultancy firm forecasts that consumers will see a notable seven per cent reduction in their premiums in 2026, bringing the average cost down to approximately £306. This decline is attributed to an expected further decrease in claims frequency and, crucially, a highly competitive UK insurance market.
Cherry Chan, a partner at Deloitte, commented: “Home insurers will have breathed a sigh of relief at the relatively mild weather so far this winter, leading to fewer claims compared to this time last year.” Official Met Office data confirms that 2025 has been drier than average for the UK as a whole.
Potential Risks and Regulatory Scrutiny
Chan also sounded a note of caution, highlighting that the very dry summer could lead to a surge in subsidence claims later in 2025, creating a potential 'sting in the tail' for the year's results. Insurers are also closely monitoring weather patterns for the first quarter of 2026.
Beyond the climate, the market dynamics themselves pose a challenge. “The market remains competitive, however, and insurers need to both hold on to existing customers and attract new ones,” Chan explained. She added that the expected premium drops will likely erode underwriting profitability, meaning that the most successful firms will be those excelling in customer service and operational efficiency.
This forecast arrives as the sector faces increased regulatory attention. The UK's financial watchdog announced last week that it will heighten its scrutiny of home and travel insurers. This move follows a 'super complaint' from consumer group Which? regarding concerns over falling service standards within the industry.
