It’s likely that many of your clients are going to see the cost of insuring their home rise this year following the continued battering the UK has suffered from wind and rain over the past few weeks.
One of the country’s leading accountancy firms has warned that the average cost of building cover could jump 5% over the next 12 months, with households directly affected by flooding facing an even bigger hike in their premium.
As estimates on the total cost of household claims to date nudge near the £500M mark, the odds are that insurers will pass on the bill to customers.
We’re all facing a rise in the cost of our household premium from next summer as the agreement between government and insurers kicks in, aiming to raise around £180M a year from all insured households to cover flood claims. Homes in flood risk areas will contribute more although there will be a cap depending on their council tax band.
However, if we’re going to experience more winters like this more frequently – and of course we can’t rule out more wet summers either – then these contributions could well rise if the frequency of flood claims increases and more areas are classified as high risk.
And it’s worth remembering that there is still some uncertainty as to the properties that won’t be covered by the Flood Re scheme. For example, band H properties in England and their equivalent in Scotland, Wales and Northern Ireland and homes built after 1st January 2009 will not receive coverage under the scheme yet will still be subject to the levy.
All the while, the blame game is being played in the Houses of Parliament with the warring factions pointing the finger at one another forgetting that, in many circumstances, the current administration is having to deal with decisions made years ago and decisions not necessarily by the UK government of the day.
Flood defence and protection costs money – the question is, how much is the current and future governments willing to spend especially if flooding will increase as climate models suggest and at what point will the insurance industry say it can no longer meet the cost of flood related losses.
As the government is going to be forced to rethink its flood defence strategy, the insurance industry may well be forced to review the levels of cover that household policies provide.
Could, for example, insurers repackage home emergency cover to step in and offer some sort of immediate assistance to householders and possibly mitigate potential losses? I would argue that the recent floods and storms have created more of a need for home emergency cover. It could provide a viable alternative to claiming against a home insurance policy for some flood related emergencies such as blocked external drains within the boundaries of the property.
Either as a standalone or additional option to home insurance, home emergency cover currently deals with the cost of call out charges, repair bills or material costs if the worse happens such as a burst pipe or a gas leak or heating failure. It can save the householder from claiming against their main policy in many instances, meaning they won’t lose any no claims discount, and of course there is no excess.
Home emergency cover can be a valuable product for many householders in its current form. With a little creative thinking by insurers, it could become a must-have and save insurers and householders alike a fortune.
Rob Rushton is head of sales and marketing at Source Insurance
