The changing face of home insurance – four facts worth knowing

The ABI’s 2014 Key Facts guide uncovers some home truths about UK general insurance and its significant contribution towards a healthy economy and society. The UK insurance industry is the largest in Europe and comes in at an impressive number three on the world leader board. According to them, insurance plays a vital role in the UK’s investment market; £1.8 trillion (equivalent to 25% of the UK’s total net worth) and racking up nearly £12 billion in Government taxes. Insurance companies employ around 315,000 individuals, of which more than a third are employed directly by insurers. With 14.3 million of us owning our households, (just under two-thirds of the 22.6 million total) most of us will opt for property protection, but do we really understand the finer details of house insurance policies when we sign on the dotted line?

Global warming and climate change
Insurance companies are well aware of climate change, particularly in the last decade. The non believers among us may very well turn a blind eye and laugh at the concept of global warming, but the general consensus of renowned UK scientists is that we are going to experience persistent extreme weather conditions more and more. We’ve already had to contend with storm surges and floods in places like Boscastle, York and Carlisle, and who can dismiss the phenomena of tornados and hurricanes in London and Birmingham? It’s extremely important then, that homes are appropriately insured, especially those living in coastal areas. Insurance companies don’t really cater for ongoing extreme weather events and people with basic home insurance packages may be left to pick up the pieces alone. Modern day claims are being denied through the ‘wear and tear’ clause. If your property has been demolished by storm or flood, insurance companies will always try to dodge responsibility by insisting the damage is due to inappropriate maintenance.
The effects of the economic downturn
Since 2007, when the recession began to sweep across the globe, a number of significant changes in home insurance policies have appeared. Firstly, the economic downturn saw many struggle with job losses and financial debt. Most of us were forced to prioritize our most pressing bills and many of us chose to default on home insurance. In tough times, it’s only natural to think that fire or flood won’t happen, but lapsed policy holders can find themselves without a home if disaster strikes. Another factor that came into play was the rush to find cheaper insurance. While it’s true to say that online comparison sites will quote figures that are more competitive, the buyer may be fooled into taking out a policy that makes up for the short fall in other areas. Homeowners who haven’t made a claim in many years are particularly vulnerable in this regard and may be shocked to find their newer, less expensive insurance doesn’t cover them at all.

Exuberant excess fees
Increasing price hikes in excess fees on home insurance policies has had several effects on an unsuspecting public. As a result of climate change and an unprecedented global economic and fiscal collapse, insurance companies have been hard hit. With unemployment rife, fraudulent claims have increased by 50%. This has a knock on effect with regard to excess fees in policies, and while the less off scrambled for cheaper insurance many failed to read the finer details of underwriting criteria. During the recession, in a bid to save pennies, many opted for structural cover only and a lot of these polices did not accurately asses the cost of building a home from scratch. The Royal Institute of Chartered Surveyors now offers a calculator to help you do this at calculator.bcis.co.uk. Indeed, it’s fair to say most people these days are not even aware they have an excess fee clause until that fateful day when they go to make a claim. With current fees ranging between £500 -£1,000, it’s easy to see how home insurance can literally be unusable. Unless your home has incurred damage that amounts to £5,000 or more, it is pointless to make a claim and even if you decide to cash in you’ll pay for it next year when your premium trebles.

Home insurance tricks of the trade – becoming aware
Home insurance is a business much like any other and those working within its confines employ a variety of tricks to avoid paying out exorbitant sums. While these tried and tested methods may be legal, it’s wise to brush up on some of the more commonly used tactics. Read your policy carefully: make sure you understand what is covered. A mistake, however innocent, can be used to reject your claim. That’s precisely why home insurance companies constantly advertise using the humane appeal with emphasis on how they will take care of all ‘that messy stuff you can’t be bothered with’. They rely on you to trust them in the hope you’ll overlook the finer print. Don’t count on well trained sales insurance staff and what they verbally offer; insurance companies make millions every year because people get bored with details and usually tune out. Delay tactics are also common, and while you may tire of the constant running around and endless phone calls, patience truly does pay off in the end. Don’t get pulled in by comparison websites. Choose organisations that are official and in a position to guide you towards choosing the correct kind of home insurance. They have nothing to gain monetarily and have no ulterior agenda. Further info can be found at The Royal Institute of Chartered Surveyors (www.rics.org) or the Association of British Insurers (www.abi.org.uk) or you can compare home insurance policies at cityinsurance.co.uk