The cumulative impact of these rate reductions, however, has affected the results of major insurers, leaving the industry in a position where the cost of claims and expenses are exceeding the premiums paid by customers. Past shortfalls may have been covered by interest earned on reserves (kept aside to pay for outstanding claims) but, as interest rates have fallen, so have these resources.
Insurers are now looking to increase rates for the remainder of 2009 to balance their figures. Each insurer has its own plan, but most look at each customer and make a decision based on a combination of their past claims, their risk profile, and the claims trend for their particular business sector and class of business. It is impossible to predict with certainty, but overall rates are expected to rise by around 5% in 2009, with some increasing by more and others not changing at all. For customers where activity is reducing, rates may increase but premiums could still come down.
There is still competition among insurers to insure well run businesses - albeit less so than in the past few years. This is because some insurers have deliberately reduced the amount of business they handle, or become much more selective.
Meanwhile, we've become wary of the financial security of some insurers who are based abroad - a position prompted by the problems encountered by US-based insurer, AIG. In order to protect our clients, the number of insurers we are prepared to recommend has been adjusted accordingly. We are deeply aware of the financial strains facing our clients at present and will make sure your insurance arrangements reflect your current business activities. As a Member of Broker Network, the UK's longest-established commercial network, we have particularly strong relationships with a host of quality insurers, and will continue to negotiate the best possible deal for you.
No industry is immune from the effects of the credit crunch, and the insurance sector is no exception. Since 2005, rates for most types of insurance policies have reduced - although some premiums may have increased to reflect business growth.