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Opinion


robertson argues that flat owners are beingpenalised by changes in thecommercial property insurancemarket


Paul


Thegrowing ofmarijuana is anemergingproblemfor


insurers in the buy-to-letsector


Flatowners oFtenhave little or no choice inwherethe block policy fortheir buildings insurance is placed and rely on the insurance industry to provide themwith appropriate coveratareasonable premium.However, flatowners are increasingly facedwithsignificant reductions andrestrictions in cover by theirinsurersand they areonly likelytorealise thiswhen they have a claim. So,what are the new exposurestoflatowners andwhy have they beenintroduced? Waterdamageformsnearly


75%ofclaimsinblocksofflats, so increasing theexcessfor escape of waterisaneasyway forinsurersto increase their profits. Yet this comes at theexpense of anyflatowner wholivesunderthe source of a leak coming fromthe flat above. As most leases aretoo oldtodetailhow insuranceexcessesare to be dealt with,thisleavesflatowners with anunpleasant surprisewhen they have to paythe excess. This brings into questionwhether or notlarge waterdamageexcessesare fair and appropriate forblock policies. Unoccupied property is another


areawhere flatownersmay lose out, in this casebecauseinsurersare restrictingcover.Where property is leftemptyfor anyperiodof time,any damage that occurs can remainundetected foraprolonged period,leading to significantly increasedrepaircosts. Fair enough,


30


youmay say.However, in blocks of flats thenumberofoccupants usuallymeans that anydamageis quickly discovered. In 2011wesaw somecompletely inappropriate unoccupancyclauses added to blocks of flats policies,leaving many residentsatriskofnot being provided with the cover they needed Theillegal cultivation of drugs,


such as thegrowing ofmarijuana, is anemerging problemfor insurers in thebuy-to-letsector of thehousebuyingmarketand canleadtosignificantfire risks. In blocks of flats, it is far less of a problemas, again,the number of occupantsincreases thelikelihood of discovery,making flats farless attractive than houses forsuch illegalactivities. Policies that have exclusions for the illegal cultivation of drugsimpose conditions that couldimpactoninnocentflat owners in the event of a fire. Whenalarge loss occurs in


ablock of flats then thecost of alternativeaccommodation andloss of rent will formasignificantpartof the insurance claim.Another recent move by insurers -thatappears simply to beaquick anddirtyway to increase profits -has beentolimit cover. This has been done bymany means,including applying afixed monetarylimit,reducingthe length of timethis is paid (say foronly 12months),setting inappropriate limits defininghowsettlementis


Itakea different view-most insurers simply do not understand the dynamics of the flats insurance market


apportionedbetween flats of differing sizes and by not providing recompense forlossofrentfor letflats. Insurers that haveimposedthese


restrictions on coverwillargue that they have done so to keep future premiumslower. Itakeadifferent view-most insurers simply do not understandthe dynamics of the flats insurancemarket. Thesepolicy restrictions areclearly designedtosolve exposures they have in the commercial property,buy-to-letand property investor insurancemarket. Most flatownershavelittleorno


sayinwho insurestheir block. So it isimperative that thoseresponsible fortakingout coverunderstand exactlywhat they arebuying. The economic climate of thelastfewyears has promotedaculture that believes cheapest is best.However,when this culture exposes innocent flatowners to alackofappropriate insurancecover then it is timeto think again. Sowhat will 2012 bringfor flat


owners?Certainly in termsofblock insurancemany will, inmyview, be sold short and left without the cover they need.Ifyou areresponsible for making insurancedecisions,try to ensure youobtain thecorrect coverata fair price.●


Paulrobertson isManagingDirectorofMidwayInsurance Services Ltd&1st Sure Ltd


tel0845 3702848 emailpaul@midway.co.uk webwww.midway.co.uk


Spring2012 Flat Living


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