It’s an ill wind…… How the world’s windstorm losses may affect your insurance costs in 2018

2017 has been the worst year in monetary terms for windstorm damage since 2005. That was the year when Hurricane Katrina caused so much devastation.

In 2017 the insurance costs of Hurricanes Irma and Maria alone in the United States are estimated to exceed US$100 billion. In total more than US$ 350 billion of windstorm losses will be paid by insurers over the next two years.

There is no question that most insurers will be able to absorb these losses, because there was excess catastrophe reinsurance capacity available this year.

However, there is only one way for insurers and reinsurers to pay their claims and to reserve for future losses and that is to spread premium increases across the whole of their insurance book. While the bulk of the increases will fall in those areas of the world that have been worst affected by the storms, premiums for general business elsewhere will have to rise to persuade insurers to continue to provide cover for risks where the returns on capital have historically been small or negative.

Motor business is always a soft target, because without it we cannot drive our cars. But other forms of personal and commercial insurance, where insurance companies have been scrambling over themselves to provide as low premiums as they can, have effectively been subsidised by the past profits of catastrophe insurance.

Early estimates are that most premiums will rise next year by between 10% and 15% and for some budget policies the increases are likely to be more.

Comparison sites are largely geared towards offering clients the best price. Some insurers are likely to cut back on the benefits of their policies in order to continue to appear competitive.

When thinking about renewing with your existing insurer or choosing a different policy at your next renewal, please do not simply concentrate on what it will cost you, but on how adequate the cover will be for your needs. A good insurance broker will advise you how to get the best value from your insurance policy and give you quality protection as well.

 


Insurance Premium Tax v Value Added Tax for insurance

Next June Insurance Premium Tax is due to rise from 10% to 12%. It already stands at 20% on Travel policies.

Is it now time to consider scrapping Insurance Premium Tax altogether and replacing it with VAT, as applies to most other services?

Rather than increase everyone’s premiums this could in fact lower them!

At present insurance providers cannot recover VAT, so every claim that is paid costs insurers 20% more than it should. Insurers cannot recover VAT on their overheads, unless they have some other source of income that is VAT registered and even then they would have to prove that their costs directly relate to that area of their business.

If claims were to cost less to insurers and other overheads reduced they would reflect these in their premiums. At present customers have to bear the inherent VAT costs plus the Insurance Premium Tax.

We have seen Insurance Premium Tax creep up steadily with spurious reasoning for its increase. Prior to BREXIT it seemed logical to equate this tax to similar ones on the Continent, but now this reasoning is redundant.

Comments, please!


Insurance Premium Tax

Insurance Premium Tax is yet another tax that has to be paid with little or no benefit for the people that pay it! Originally set at 5%, by small steps it has been increased until, as from 1st October 2016, it now stands at 10% of all general insurance premiums (apart from Travel and some other specialist covers where it is 20%), including alterations and additions.

This makes it all the more important for you to ensure that you are insuring your home or business for the correct amount. Buildings insurance needs to take into consideration the rebuilding cost of the property, not the commonly held misconception that it should be the resale price.

Our recommended professional valuation consultants can give you the peace of mind that you need by assessing your precise insurance requirements and also recommend improvements to your risk protections that will save you money on your insurance costs.

They can also assist you with Contents and Fine Art valuations.

Call 01306 734105 for further details.


Flood Protection – Should we be building an ark?

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FLOOD PROTECTION – SHOULD WE BE BUILDING AN ARK?

In the past ten years there have been at least 13 incidents of serious flooding in the UK with only 2006 and 2011 offering respite. So frequent have these occurrences been that up to five million homes are considered to be at risk. The recent storms Desmond and Eva flooded 16,000 homes in England alone.

In December 2013 severe flooding in Mole Valley and elsewhere in Surrey made a misery of Christmas for around a thousand people.

Surrey County Council published a draft Local Flood Risk Management Strategy document in August 2015. There are several types of flooding that have to be considered, including River (fluvial), Surface Water, Groundwater, Reservoir and Sewer.

The main concerns appear to relate to surface water run-off and sewer back up, which affects properties on high ground as well as those close to rivers or reservoirs. In fact properties on higher ground are more likely to be exposed to these dangers, as surface water is likely to take longer to dissipate due to the composition of the soil and the lack of exposed soil that can absorb the liquid.

Surrey is currently undergoing a rapid domestic building boom. However, due to Green Belt restrictions this means that new houses are mostly constructed within existing housing boundaries. So we are witnessing higher density of housing, greater levels of run off and increased pressure on the capacity of aging sewers.

While the Environment Agency and other bodies seek to discourage new homes being constructed in fluvial flood areas, no such incentives apply to other properties.

We all owe a duty to our neighbours not just to protect our own homes against flooding, but to consider the effects that paving over drives and patios, pouring grease and fat down the sink, or removing trees and shrubs may have on the ability of local flood defences to cope. Perhaps we should also ask Local Government to consider the consequences of allowing unfettered construction in the ever encroaching suburbs of London.

If you live in an affected area of Surrey, or indeed any other area in the UK where there have been problems in obtaining insurance for flood at an affordable price, the newly introduced Flood Re scheme means that we have some insurers who are looking to insure these types of homes.

Please contact Anthony Wakefield or Miss Robyn Homewood on  01306 734105 for a quote.


TELEMATICS – THE FUTURE OF HOME PROTECTION

TELEMATICS

THE FUTURE OF HOME PROTECTION

We have all become familiar with our burglar alarms at home, but soon these will become as redundant as the fax machine (remember that?).

Overpriced, intrusive and inefficient. These are words that often attributed to these 20th Century devices.

Welcome to telematics, which are starting to revolutionise the way we protect our homes. Originating from the French “télématique” , this new technology combines the ease of information gathering with computer and mobile communication.

Rather than relying on neighbours or a call centre to monitor the security of your house, modern telematics can relay the information direct to your phone, tablet or computer. They also work in reverse, permitting you to control the devices in your home from anywhere in the world.

The leaders in this field are British Gas with their HIVE range of products (https://www.hivehome.com/), Google with NEST (https://nest.com/uk/) and CANARY (https://canary.is/)

Understanding the potential of these systems can only be appreciated if you visit these web sites and view the videos that explain the products.

When tied in with Smart Meters, which are set to be commonplace in the UK by 2020, householders will be able to be masters of their own homes, keeping a close eye on their heating and other utility costs and controlling the running of the house from near or far.

We see these developments as reducing the claims exposures of our insurers and, as such, can now offer between 5% and 10% premium reductions under our Homes2Insure and Connoisseur Household policies for owners of these systems.

When combined with our other premium discounts for loss history, client age and traditional security, we can offer up to 30% savings on our standard premiums.

Contact Anthony Wakefield (aw@anthonywakefield.com) or Miss Robyn Homewood (rh@anthonywakefield.com) for further details.


Barn and Mill Conversions

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Who would not like the idea of living in a beautifully converted barn or mill and having wonderful views over the Surrey countryside? You would be surprised how many!

Agricultural buildings offer a means to increase the rural housing stock without interfering with Green Belt planning restrictions. Or do they?

In March 2015, the Department for Communities and Local Government issued new planning practice guidelines because approximately 52% of prior approval applications for agricultural to residential conversions had been refused in the period between April and September 2014. Under the Permitted Development rights issued in 2014 local councils were expected to allow farm buildings to be converted to homes without planning permission.

Mole Valley District Council has an enlightened approach towards agricultural conversions and it is a credit to the Planning Department that a holistic concept of maintaining the traditional character of the area, along with the need to find new uses for redundant properties, has continued to make our Surrey Hills such a wonderful place to live in.

But there are drawbacks to owning a converted agricultural building. Access is one, with planning decisions often limiting the amount of car parking space so as not to affect the character of the countryside. Also lack of provision may mean that internet access is often poor or not available and connection to mains services either difficult or impossible.

In addition, there is the question of whether an agricultural building close to a Listed Property also has the protection of itself being Listed. In my researches this is normally a decision for the local Council to make and often hinges on whether the property is considered to lie within the curtilage of the main property.

From an insurance perspective, the construction of most converted farm buildings render them “non – standard” as far as many mainstream insurers are concerned. For those insurers that are prepared to consider such properties, clients need first to establish the precise rebuilding costs before comparing one insurance quote to another. Some insurers offer as part of their service a free survey to look at the correct reinstatement cost of a building and also advice over fire and security protection.

Remember also that many agricultural buildings have been constructed in flood plains, so unless this has been taken into consideration as part of the conversion process, flood cover may not always be available.

Contact me on 01306 734105 or at aw@anthonywakefield.com for more information.


Flood Re – an update

Since we last reported on the development of Flood Re last year there have been several improvements to the new initiative, which hopefully see many householders in flood prone areas able to purchase affordable flood insurance from April onwards in 2016.

Insurers will be able to buy reinsurance from Flood Re, a not-for-profit insurance fund, owned and managed by the insurance industry, for eligible households that are deemed to be at risk from flooding. It would appear that this now includes surface water flooding as well as those homes that are exposed to coastal or river flooding.

Also properties in all Council Tax bands, including H and I, will now be eligible to be covered by the scheme.

The cost of the reinsurance, as passed on to eligible households, will be capped to an amount geared to the applicable Council Tax band, starting at £210 per annum for homes in Band A and peaking at £1,200 for properties in Band H.

It is anticipated that the standard Flood Re excess (the amount paid by the insurer before they can claim from their reinsurance) will be £250, although curiously the guidance notes issued by Flood Re seem to leave open the option for the insurers to impose higher Flood excesses on their own clients!

The scheme will also be funded by a general levy on the insurance industry of £180 million a year. As insurers are being left to set their own terms for each policy they issue this does not mean that the cost will be passed on to clients whose properties are not prone to flooding but, there again, there is nothing like blaming the Government when insurers have to increase their premiums (they are currently having to pay for the floods in the North of England and Scotland).

As detailed before, many properties, especially those built after January 2009, blocks of flats and anything broadly commercial will be excluded from the scheme, so it will be important for anyone still finding it difficult to arrange flood cover after April to consult an insurance broker, such as ourselves.


Changes to Insurance Premium Tax from 1st November 2015

UK tax on Household, Motor, Commercial and most other types of general insurance (apart from Travel Insurance  and some other categories of insurance where the tax is already at 20%) is set to increase from 6% to 9.5% from 1st November 2015.

This is estimated to raise an additional £530m for the Government in the current tax year, rising to £1,460m in 2016-7 (source HM Revenue & Customs)

As well as applying to new policies and renewals after this date, this change will affect most additional insurance transactions from that date, even for those policies that were put in place or renewed prior to 1st November 2015.

To avoid any confusion, we are urging those of our clients that pay their premiums to us, rather than pay direct to the insurer under an instalment plan, to ensure that premium is received prior to 1st November 2015 for business that applies prior to that date in order to continue to qualify for the current 6% tax rate. Late payments, if accepted under exceptional circumstances, will be charged at the 9.5% tax rate.

We will be applying the 9.5% rate to all transactions that apply after the 1st November 2015, including those renewals for which invitations are sent out from now until that date.

There have been contingencies put in place by HM Revenue & Customs to prevent clients from avoiding paying the additional tax by, for example, extending the policy or adding a new location to the cover.

Also, any refunds of premium after 1st November 2015 for policies incepting or renewed prior to that date will only benefit from a tax refund at the original rate paid (6%).

There are some transitional allowances that have been offered for changes to current policies that may result in some tax for amendments being charged at 6%, even after 1st November. If we find that this applies to your policy we will refund any tax that is due to you.


BNB and short term lets

There has been some disturbing news in the weekend papers about people who have taken in short term guests from the Airbnb web site and subsequently found that their household insurance will not respond to a claim, even when the loss has nothing to do with the actual letting.

The Airbnb indemnity covers the host against a number of contingencies, but not those that are not the fault of the guest. So if you suffer, for example, an electrical fire, some insurers say that non – disclosure currently enables them to void their policies.

Until the new Insurance Act 2015 comes into force, non-disclosure can still allow some insurers to escape their obligations to respond to a claim.

Even when they do respond, the policy wording may not cover the consequences of letting out a property.

With more and more people making use of their spare rooms or holiday homes to augment their income it is important to ensure that you first tell your insurers about these activities and then ask them to tailor their policy cover to suit your needs.

Some household policies do not cover Business use (including short or long term lets) unless an extension is granted. This means that your Personal Liability exposure to paying guests will not be covered without such an extension.

The income that you gain for letting out your properties needs to be noted by the insurers, otherwise you may not be able to recover income that you would otherwise gained if you suffer a serious fire or other loss at your home.

With our flexible Homes2Insure policy and the other policies that we can offer we can normally design cover that will give you the protection that you need without fear of being fobbed off with the dreaded “small print”!


Getting ready for winter

 

Winter check List

As winters get colder, claims for water damage increase. Nobody wants the disruption this causes, so here are a few ways in which you can reduce the risk.

  • In very cold weather, it’s a good idea to leave your central heating on 24 hours a day. You can go back to your normal pattern once temperatures rise above freezing.
  • Find out where your stop cock is on the incoming water supply and label it.
  • Label your other service valves.
  • Find out where the drain valves on your system are, as these can be used, in an emergency, to empty your water and central heating systems are, once your boiler or immersion has been turned off.
  • Make sure that the pipes and tanks in your roof are properly insulated.
  • If it’s very cold weather, it may be a good idea to leave your access hatch partially open.
  • Inspect your roof cistern to make sure that, if it is metallic, it’s not showing signs of corrosion.
  • Check flexible hoses to dishwashers and washing machines.
  • If you have dripping taps or your overflow pipes are running, you have a problem. To avoid this getting out of control, get a plumber in. you can find one local to you on the www.ciphe.org.uk website.
  • Loud banging from your pipes may mean that a pipe is freezing. You should turn your boiler off and call a plumber immediately.
  • Installing a leak prevention and detection system may earn you a discount on your premium!
  • Make sure that your heating appliances are serviced annually.