An insurance price is an estimate of future claims. Insurers combine how often a type of loss happens, how costly it is, and how your own circumstances change that picture, then add a margin for costs and profit. The result is your premium.
The two questions behind every price
Underwriting asks two things: how likely is a claim, and how big will it be. A young driver faces higher motor premiums because statistics show a higher chance of a costly claim. A home in a flood area costs more to cover because the expected loss is larger. The same logic applies across every product.
Where the numbers come from
Insurers use their own claims history, industry data such as from the ABI, and external signals such as previous claims and location. Pricing models are updated as claims experience changes, which is why prices move even when your circumstances do not.
Why your price differs from someone else’s
Your personal risk factors, such as age, history, property and vehicle, change the price. So do the cover, limits and excess you choose, wider market claims costs and reinsurance pricing, and competition and the regulator’s pricing rules. The FCA’s pricing practices remedy changed how insurers treat renewing customers, narrowing the gap between new and existing-buyer prices. Our analysis of why premiums move tracks this in practice. The regulation hub covers the rules in force.