UK Insurance Sector Growth Outlook
The UK insurance industry is poised for a period of steady yet gradual growth in premium income over the next three years, according to the latest EY ITEM Club Outlook for Financial Services. This forecast indicates a shift back to more typical premium increase rates, which are anticipated to average around 3.4%. This figure is reminiscent of the growth patterns observed between 2010 and 2019, following a phase marked by significant premium hikes.
As economic conditions stabilize, with falling interest rates and diminishing cost pressures, the growth rate for non-life insurance premiums is projected to be 5.2% in 2025, a notable decrease from 8.4% in 2024. Growth is expected to further moderate to 4.3% in 2026 and 3.6% in 2027. Similarly, life insurance premiums are set to follow a comparable trajectory, with growth estimated at 4.4% in 2025 (down from 5.8% in 2024), followed by 3.3% in 2026 and 3.7% in 2027.
This report suggests that the increasing demand for non-life insurance products, such as home and motor insurance, will be driven by an improving housing market and real income gains for UK households. Furthermore, the alleviation of supply chain challenges, which had previously escalated the costs of replacement parts, will enable insurers to implement more moderate premium increases.
- Non-life insurance premium growth forecasts:
- 2025: 5.2% (down from 8.4% in 2024)
- 2026: 4.3%
- 2027: 3.6%
- Life insurance premium growth forecasts:
- 2025: 4.4% (down from 5.8% in 2024)
- 2026: 3.3%
- 2027: 3.7%
For life insurance, the anticipated growth will be fueled by stable consumer demand and an expanding UK workforce, which is likely to lead to increased participation in workplace pension schemes. However, analysts caution that a projected slowdown in the growth of household disposable income could pose challenges for the sector.
Martina Neary, EY UK Insurance Leader, commented on the outlook: “The recovery of the UK economy is promising for both insurers and their customers, with the insurance sector set to experience steady growth in the coming years. The decline in interest rates and the stabilization of inflation will be pivotal in alleviating consumer hesitance, thereby enhancing demand for both general and life insurance products in the upcoming year.”
She further noted, “While premium growth is anticipated to be moderate this year, the market remains resilient. Nonetheless, persistent geopolitical uncertainties and unpredictable weather patterns could pose risks to this growth trajectory. UK insurers will need to maintain a delicate balance between managing costs, making strategic adjustments in response to market fluctuations, supporting their customers—especially those most vulnerable—and exploring innovative paths for sustainable growth.”
