Britain’s insurers are facing a few bumps in the road says Peel Hunt with the FCA’s report on pricing set to be released within a few days.
Central will be the moves by the regulator to outlaw the charging of new customers less than existing ones and the practice of hiking prices when policies are rolled over, something known as price walking.
In addition, the PRA, which is part of the Bank of England, is looking at ways new start-ups can enter the market and raise money, notes the broker.
The pricing rules would kick in from 2022 and apply to renewal notices (or quotes) sent after the rules take effect.
Renewal rates are likely to decline relative to new business in order to close the pricing gap which could increase retentions.
But with both new business and renewal discounting likely to be allowed Home and Motor market policies will remain competitive.
The broker kept its 'reduce' rating on Admiral PLC (LON:ADM) with a price target of 2,430p) citing looming headwinds as lockdown eases and claims inflation starts to normalise again.
“The yield remains the key attraction, and the sale of Confused.com should give it another boost.
“However, at 20x 2022E PE, we still consider Admiral richly valued and stick with our reduce rating.”
Shares in Admiral added 0.4% to 2,952p.