It is all very well turning to certain websites that promise to find us the best prices on home insurance, but when all the options seem to be at least double what we paid before, it hurts.
It is not simply that property insurers as businesses want to make a profit from adversity: there are other factors that are genuinely affecting these premiums.
First is the impact of climate change in the form of more frequent and more extreme ‘weather events’. Storm seasons start in September and in the 2023/24 storm season there were eleven named storms. In 2024/25, we are already bracing ourselves for number five next week, Éowyn, with 90mph winds across the whole of the UK. We have all seen the impact of these storms on the news and social media: trees down, tiles and slates lost and roofs removed, homes flooded and essential services crashed. The increase in claims speaks not only of personal grief, but also of a situation likely to get worse – and money needing to be recouped.
Secondly, once the weather has subsided, the clean up begins, followed by the repairs and rebuilding. Everything has a cost, and that cost is increasing. From the labour (if you can get it when there is so much demand) to dig out drains or supply skips, to the erection of scaffolding, to the skills of the plasterers, carpenters, decorators, electricians, roofers and so on. The cost of skilled building trade labour has gone up since pre-pandemic times by typically 50% and that is before the government’s increases in taxes and national insurance have come into force.
Then there are fees needed for the professional expertise of chartered surveyors, engineers, architects, lawyers and loss-adjusters. Property disasters do not come unaccompanied – and day rates go up when services are under pressure.
Thirdly, the global rise in inflation means that the materials to make do and mend have become more scarce and more expensive. From restocking a non-functioning freezer to rebuilding an entire house, everything costs more and this is reflected in higher premiums.
Two less obvious causes for higher premiums are:
- the use of more sophisticated technology which can now profile properties more accurately than previously; and
- changing rules for insurers.
Companies are now required to hold sufficient capital in reserve to cover claims. The conservative estimate for claims following the terrible fires in California is currently between $35 and $45 billion dollars. How much of this will be covered by insurance?
This leads to a further cause for higher premiums, namely, to cover ‘social inflation’, the cost to insurance companies of fighting court cases over payouts. The last thing anyone needs when living in the miserable aftermath of fire or flood is to find that their insurance does not cover their losses – or that their insurer has gone bust.
Right, time to tie down the garden furniture ready for Éowyn … and read our article How do insurance companies reduce property payouts? for advice on how to ensure your property is properly insured.