UK insurers face 'tricky periods' as new pricing rules take hold – Aviva CEO

U.K. insurers are in for an "interesting" 2022 as new rules about how they price personal lines insurance come into force at the beginning of next year, Aviva PLC CEO Amanda Blanc said.

U.K. personal lines insurers will no longer be able to charge new customers cheaper prices than renewing customers as part of a package of pricing reforms being implemented by the Financial Conduct Authority.

Blanc told analysts on an earnings call that the industry was facing an "unprecedented change," as all U.K. insurers would be launching new pricing models at the same time for the first time. "I think there could be some tricky periods over the coming months as everybody settles in to this new way of working on rating," she said.

Blanc also noted that the pricing change was coming in as motor insurance prices were falling in response to declining claims frequency triggered by COVID-19-related lockdowns, and as new rules on handling low-value car accident injuries were due to come into force in May 2022.

Aviva is in "very good shape" to cope with the pricing changes, Blanc said, as the company had already made efforts to reduce the gap between prices for new and renewal customers in its own book and has seen "really strong" growth on price comparison websites. However, she added that the insurer will have to respond to the competitive landscape as it develops.

Aviva reported net flows from its savings and retirement business to £7.3 billion in the first nine months of 2021, up 21% on the £6 billion it reported in the same period last year. General insurance gross written premiums were up 5% to £6.5 billion from £6.2 billion. However, the present value of new business for its annuities and equity release business was down 14% to £5.3 billion from £6.2 billion. The British insurer's solvency ratio was up 12 percentage points to 215% from 203%.

The company also reported that it had completed around £450 million of its £750 million share buyback program.

Blanc said following the completion of the sales of its French and Italian businesses, it has now collected £4.9 billion of the expected £7.5 billion proceeds it is anticipating from its disposal program. The remaining disposals of Italian life business and operations in Poland and Vietnam were expected to complete by the end of 2021, and the regulatory approval and completion processes are "currently proceeding to plan."

The CEO added that the insurer remains committed to return "at least" £4 billion to shareholders by the half-year point in 2022 and will provide an update on plans to return the remaining capital when it announces its full-year 2021 results in March 2022.