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News Review: General Insurance

Stormy times ahead for household insurance

by Gary Little, head of key accounts, Assurant Intermediary

The latest AA British Insur- ance Premium Index re- vealed that the cost of a typi- cal home buildings policy rose to its highest-ever level over the three months end- ing 30 September 2011. The index shows a steady

rise in the cost of buildings cover since 2009 and there’s no slowdown on the horizon. Industry consensus is that

the weather is the primary reason behind the continued rise. The UK experienced two severe winters that caused widespread property damage thanks to broken and frozen pipes. The AA has singled out water-related damage as the single biggest cause of home insurance claims. Fig- ures from the Association of British Insurers appear to support that view. Its figures reveal that claims for wa- ter damage reached £730m in 2009, almost double the £370m claimed for burglar- ies over the same period.

Extreme weather Extreme weather conditions represent a major concern for insurers, particularly as the UK appears to be experi- encing more severe weather events such as flash floods in areas with no flooding his- tory as well as damage from extreme hailstorms, lightning strikes and even tornadoes. A report from Confused. com last October stated that claims for storm re- lated damage have jumped

by 68% over the past year. The recent winter storms in England and Scotland led to a rush of claims last month. One insurer revealed that it received more claims in just one day than they would usually get in the whole of January. Another saw roof- ing claims jump twelve-fold. Many drafted in additional claims handling staff to deal with the influx of calls. Insurers have to consid- er the potential for future claims and ensure they have adequate reserves to meet the cost of extreme and widespread weather damage – hence the steady upward creep in premiums.

Priorities shifting At the same time household budgets are being stretched to the limit. As wages fail to keep up with inflation dis- posable income is declin- ing. Arguably the common personal insurances such as motor and household have become commoditised over recent years and consumers have shown an increasing willingness to shop around and self-advise, buying solely on price. I sincerely hope that premium cost does not become the prime consider- ation and price the decisive factor in the purchase deci- sion.

Competing with computers Intermediaries are going to have their work cut out for them as price comparison sites and direct players target household insurance more aggressively to grow market share. I firmly believe how- ever that intermediaries can fight their corner – not only

defending their existing busi- ness but also increasing it. You are best placed to advise your clients on the measures they can take to protect their homes and mitigate the risk of weather-related damage. Helping prevent a potential

Any old iron

The theft of scrap metal has hit the headlines recently. Just before Christmas a bronze sculpture was stolen from a public park in south east London where it had stood for more than 40 years. The local authority had it insured for half a million pounds. Melted down for scrap, it probably wouldn’t even fetch £1,000. Rising prices for copper, lead and bronze have led to a dramatic increase in metal theft with criminals targeting railway lines, manhole covers, cabling and even war memorials. The Association of Chief Police Officers estimates that metal theft costs the UK economy £770m every year. Insurers argue that the consequential costs could run much higher and are demanding a unified fight for changes to scrap metal sales. The ABI has written to all members seeking claims data and views on how it should tackle the issue.

Unfortunately the insurable costs are often undervalued as they include the damage caused by criminals. Theft of plumbing pipes can cause flooding and some criminals stripping property of elec- trical cables set fire to them to remove the plastic coating, causing wider damage to the property. And this is where landlords could come unstuck as these opportunistic thieves are increasingly targeting unoccupied residential properties. The cover provided under landlords’ property insurance can vary from provider to provider just as it does for residential property. It is essential that your landlord clients not only have ad- equate cover for their individual portfolio of properties. It is equally important that they understand any exclusions when it comes to unoccupied properties as well as any obligations they have as the policyholder to mitigate risk. Now might be a good time to review the policies that your

landlord clients have in place. The bill for cleaning up theft of cabling or piping from a rental property could cost a lot more than its scrap value – both in time and money.


claim is a significant step in protecting your clients against a steep hike in premi- um when it comes to renew- ing their policy. And you are best placed to source a policy that meets their needs as well as their budgets.

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