UK home insurers are expected to post a Net Combined Ratio of 103% in 2026, returning to loss-making territory as rising costs and competitive pressures weigh on profitability.
According to analysis by EY, the forecast means insurers will pay out £1.03 in claims and expenses for every £1 earned in premiums. This follows a brief return to profitability in 2025, when the NCR is expected to reach 98%.
Premiums are expected to fall by around 3% in 2026 due to increasing competition, reducing the average policy cost to £320, down from £330 in 2025. Insurers are likely to keep prices low to maintain volume and market share, further pressuring margins.
While claims volumes have dropped by 36% in recent years, total claims costs have risen sharply. Since 2020, payouts have increased by 126%, driven by higher costs for materials, labour and specialist repairs. This disconnect between frequency and severity continues to challenge profitability.
Weather patterns also played a role in recent performance. A dry summer in 2025 led to an 85% increase in subsidence claims compared to 2024. However, overall weather-related losses were relatively contained, with storm and flood events running 18% below the ten-year average.
Dan Beard, EY UK Insurance Partner, said, “After a welcome return to profitability in 2025, the UK home insurance sector is facing renewed challenge this year. Rising claims costs and intense competition are squeezing margins, leaving many insurers with limited room to manoeuvre.
“The current heightened geopolitical uncertainty adds another layer of complexity. Potential disruption to supply chains, higher fuel and energy costs, and broader wage and price pressures are likely to be felt by households and insurers alike, which could drive claims costs above current projections in the months to come.
“Now more than ever, insurers need to strike a careful balance between cost discipline and continued transformation, so they can grow sustainably and deliver long-term value for customers.”
EY said insurers will need to focus on cost control and transformation as they navigate a more challenging environment, balancing affordability with long-term sustainability.
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