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The UK home insurance industry will not turn a profit on its underwriting this year, according to an analysis, as supply chain disruptions, rising fuel costs and lower premiums weigh on returns.
UK home insurers are expected to pay out £1.03 in claims and expenses in 2026 for every £1 they receive in consumer premiums, consultancy EY has predicted.
Insurers make profit both on underwriting income — paying out less than they take in — as well as on investing premiums they hold before paying claims.
Higher fuel and energy costs, combined with broader wage and price pressures, would drive up claims costs, EY said, although some insurers could still remain profitable overall after investment returns.
Across the market, EY predicted average home insurance premiums would fall 3 per cent by the end of this year, making an average policy £10 cheaper at £320, compared with £330 in 2025 and £329 in 2024.
The total amount paid out by UK insurers has more than doubled since 2020, rising 126 per cent due to the higher costs of materials, labour and repair services.
Energy prices have surged due to the war in Iran, prompting economists to raise their inflation expectations. A Treasury summary of independent forecasts published last week showed that economists expected annual inflation to be 2.6 per cent in the fourth quarter, significantly higher than a 1.9 per cent forecast earlier this month by the Office for Budget Responsibility.
Dan Beard, an insurance partner at EY, said it was difficult to forecast exactly how geopolitical turmoil would affect prices amid uncertainty over variables such as how long the conflict would drag on.
“Disruption to supply chains, higher fuel and energy costs, and broader wage and price pressures . . . could drive claims costs above current projections,” Beard said.
Climate change has also fuelled a rise in costly weather disasters in the UK and beyond. After an exceptionally dry summer in 2025, subsidence claims rose 85 per cent compared with the year before. Heatwaves can suck the moisture out of soil, fuelling conditions that can shift or damage homes.
However, the frequency of storm and flood-related claims in the UK was relatively muted, at 18 per cent below the 10-year average, contributing to relatively higher profits last year for insurers.
