Covid-19 to benefit home insurance firms at the expense of those writing commercial risk, says analyst

One analyst believes home working will endure past the UK lockdown and have a material impact on the prices of home and commercial insurance policies

GlobalData's Yasha Kuruvilla believes home working will become more common after the UK's lockdown ends (Credit: PxHere)

Remote working will benefit home insurance firms through higher premiums if it continues after Covid-19 lockdown ends, says an analyst.

An increased risk posed to these firms as more of their customers work from home will result in higher premiums, while the opposite will be true for commercial cover providers, which will see a decrease in risk as fewer people occupy office space.

This is according to GlobalData insurance analyst Yasha Kuruvilla, who believes the greater work-life balance, as well as the expected reduction in business overhead costs, will make remote working more commonplace after the impact of the virus than before.

“Working from home could increase the risk at a property due to expensive equipment being stored there – as could regular visitors to the property due to increased theft or liability risk.

“On the other hand, businesses will not need as much office space and will have fewer contents on their premises, reducing the premiums on commercial property policies.

“This shifts risk away from commercial property towards home insurance, and premiums generated in the two business lines will need to be adjusted accordingly.”

The lockdown caused by Covid-19 has resulted in widespread remote working, and the FCA has stated that it expects home insurance firms to cover policyholders even though their risk profiles have changed – but customers will have to amend their cover once the lockdown is lifted.

Which insurers will be affected by the changing risk profiles in home and commercial coverage caused by Covid-19?

According to Kuruvilla, several insurers that write both home and commercial risk stand to benefit from the shift, while one could be hit harder due to having a bulk of commercial policies on its books.

“Aviva, AXA, Zurich, RSA and NFU Mutual all have strong market positions in the UK in both the household and commercial property markets, which puts them in a strong position to capitalise on the shift in premiums,” he said.

“Lloyds Banking Group is the second largest underwriter of household insurance and stands to benefit the most from a shift in premiums away from the commercial property sector.

“On the other hand, Allianz’s stronger position in commercial property insurance compared to household insurance may result in it taking more of a hit.”