Household insurance premiums need to increase by more than 5 per cent above the rate of inflation to make the industry profitable in the longer term according to Bacon & Woodrow.
The B&W report in today's Financial Times says the increases are needed to offset an estimated industry loss of more than £350m last year, its worst performance since 1991. The loss is blamed on storm and flood damage which wiped out profits made in previous years.
The actuarial consultants claim that while heavy losses and consolidation among bigger insurers has caused motor rates to rise steeply, household insurance premiums have remained flat.
B&W say rates will need to be increased as investment income on premiums and reserves have been slashed by low interest rates. It also claims premium rates are currently inadequate to pay for the risk of bad years.