British commercial insurers face more intense price competition and slimmer margins due to forthcoming legislative changes, according to Fitch Ratings.

“Commercial property insurance is likely to see a bigger impact than commercial motor policies, where underwriting margins are already slim and in line with domestic personal line policies,” the ratings agency says.

The Insurance Act, to take effect in August, will make it harder to refuse commercial claims because of insufficient disclosure, and will stop insurers refusing to pay if a business customer breaches a policy requirement unrelated to the claim.

And the Enterprise Act will, from next year, give customers the right to sue for damages caused by late claim payments.

Fitch says the two laws will likely lead to fewer disputes over commercial insurance claims and a rise in the number of claims paid.

“When claims are disputed, insurers may also attempt to deal with them quicker, to reduce the risk of being held liable for damages,” it says. “Overall claims costs will therefore rise and insurers will increase premiums to compensate.”

But they will struggle to lift premiums enough to fully offset higher costs, as less variation in the speed and perceived fairness of settlements puts more focus on price to win business.

However, the Insurance Act should reduce the prevalence and cost of “data dumping”, where a customer discloses large amounts of information that may not be relevant, Fitch forecasts.