Anyone who has individual shares, or a plan with holdings, in any of the UK financial institutions will probably not want to be reminded of the last 6 months. The back end of 2010 and early 2011 saw a slow but steady rise in the share price. But, with the Eurozone and elsewhere in the world still nowhere out of the financial woods yet, shares have taken a hammering.
But does the overall share price of some of these companies have any effect on your business insurance premium, for example. In a word, in capital letters, that are in bold and flashing lights, the answer is NO. We have been trading now since the year 2000. We have seen the tail end of the dot.com boom, the panic in the financial markets following 9/11 and, here in the UK, the financial bubble that the Labour party inflated and inflated from 2002 to 2007. After this fell apart we saw shares in some of the bigger UK insurers plummet and whilst they recovered during 2008, 9 and 10, many are not far off their early to mid 2008 figures.
The good thing is that these companies are so large and many so diverse, that the stock markets valuation (in its loosest possible sense) of their company has no effect whatsoever on the premiums they charge. And there is logic to his. The great Warren Buffet bought an insurance company because it had such a substantial “float” in the form of premium. If a companies share price is hit, and they try and increase this float too much, through increased premiums, one of two things will happen.
If there are competitors doing the same thing, then thay can follow the same wave as the market (in terms of premium income) increases. If however they are doing this on their own, then what tends to happen is that the compeititon cherry pick the best, at good premiums, and the company that are trying to increase only get to keep the dross.
All types of covers, such as pub insurance, are subject to fluctuating premiums throughout any year, but an increase of more than 5% is not going to be stomached by many punters in the real world.