J001010 - Lycetts Newsletter Jan 2024 LR - Flipbook - Page 4
M A R K ET
COM M E N TA RY
Last year’s commentary focused on price rises resulting from political pressures emanating
from the war in Ukraine. Sadly this continues, and this situation is further exacerbated by the
con昀氀ict in Gaza and on the West Bank.
William Nicholl
Client Director
A significant proportion of the UK’s natural capital sits
in the rural environment under the stewardship of
farmers and landowners. In light of reforms to the
Basic Payment Scheme (BPS) we continue to explore
opportunities to insure natural capital and
environmental aspirations. This is twofold as we look
to insure carbon credits, but also the reinstatement
of natural habitats such as peatland, and the tree
planting schemes that are so important in the
sequestration of carbon. Until such time as a formally
recognised carbon market is established this remains
difficult, albeit we can insure carbon in commercial
forestry. Government has set highly ambitious targets
around climate change and tree planting as we aim
for the 2050 Net Zero target. Many of these shortterm aspirations are unlikely to be fulfilled, but there
is no doubt that pressure to utilise our natural
environment to ease climate change will remain at the
forefront of UK and international policy in the
immediate future, irrespective of political party or
region. This is being demonstrated by vast tracts of
the UK being purchased by foreign investors to
achieve their environmental goals.
I am afraid that major weather issues remain at the
forefront of rural insurance. Attritional losses
covering areas such as fire and theft can be
underwritten, but the catastrophic weather events
that we seem to see on a regular basis make this a
much more complex exercise. Our experience
gleaned over 60 years of underwriting rural property
reflects this, and there is now a paucity of insurers
prepared to underwrite rural property. This inflates
insurance premiums, but also shrinks risk appetite.
Covers that we would traditionally have been able to
include in a rural combined policy now need to be
placed under specialist policies, one such example
being rural energy schemes, another being converted
farm buildings which are deemed as being for
commercial use. Please do liaise with your usual
contacts around any form of diversification.
Inflationary pressures are starting to abate, and we
certainly hope that interest rates are returning to a
more sustainable level. Nevertheless, claims inflation
continues and is particularly relevant with respect to
motor claims. This in turn is reflected in the continued
rise in premiums.
2024 marks the start of delinked payments in England
by the Rural Payments Agency (RPA) so farmers will
no longer need to submit a BPS application.
04
The phasing out of the scheme means that
businesses will have to access the Countryside
Stewardship and Sustainable Farming Incentive
schemes to replace some of this lost income.
At renewal it is imperative that all sums insured
are reviewed to ensure that they are on the correct
basis to counter the extraordinary fluctuations we
have seen in raw material and output prices. Building
costs should also be index linked to account for
inflationary pressures. An alarming statistic states
that 82 per cent of domestic houses are
underinsured. The sum insured should reflect
reinstatement costs including underground services,
driveways, and professional fees.
We have complied with Consumer Duty requirements
put forward by the Financial Conduct Authority (FCA)
which were effective from 31st July last year so you
will have seen some changes to all our paperwork,
and indeed the font size in our emails! The obligation
to be compliant can also be seen in the rural sector.
Although we can be thankful that the proposal to
require an EPC rating of C has been scrapped in
England and Wales, it remains very much on the
agenda in Scotland.
In a competitive world I can offer some external
perspective to support my belief that Lycetts is
making positive headway. In our year end client
surveys we received a +73 per cent score for Trust,
which compares favourably with the industry wide
assessment provided by Which magazine that rates
the whole profession at -20 per cent.
Furthermore, we strive to offer all those who work at
Lycetts the best possible working conditions and
environments, and our efforts have been rated by my
colleagues as being in the 3*/World Class category
through our independently run employee
engagement survey – a rating we are resolved to
maintain through continued hard work and
commitment to you and our people.
In conclusion, as we continue to juggle challenges in
the insurance market including a forecast for
continued rate rises, inflationary pressures impacting
claims, and seemingly never-ending big weather
events, amongst many other contributing factors, we
aim to uphold our Consumer Duty obligations to our
clients and maintain the high standards of service on
which we have always prided ourselves.
