As we approach the end of the year, this means issuing a new budget for a large proportion of our portfolio. We are seeing premium rates hike with insurers apply more stringent terms across both the residential and commercial market and we are having to reflect this into our service charge budgets.
Policyholders with large losses or cladding have found increases of 50% and limited insurers willing to present terms.
The main drivers of the increase in premium rates are that property premiums have been historically too low. This situation has been exacerbated in terms of insurer profitability as global interest rates have remained at rock bottom, minimising the investment income insurers obtain from the capital they hold. Insurers have had to review the inflation of the cost of building materials. Including the lack of skilled tradesman.
The coronavirus pandemic has resulted in many commercial properties being left vacant for extended periods resulting in increase in escape of water losses and vandalism which may have gone undetected for extended periods of time. Whilst this will be a contributory factor to rising rates in the commercial property market it is worth noting that claims frequency for home insurance is down during the pandemic as people have been at home more often meaning certain losses don’t occur or are detected earlier.
The “large loss fund” has depleted due to more frequent and severe weather events. Therefore, insurers are now taking the opportunity to increase the rates for future losses.
Alongside this, the use of cladding has led to some unexpected loss activity causing insurers to review the terms they are offering.
What are we doing to manage this at Burlington Estates?
We are starting the renewal process early. We are working with the building insurance broker to be ahead of the renewal date. This allows us to ensure that the risk presentation is fully evaluated and understood by the underwriters. We can then resolve any queries which may arise.
We are preparing extensive information about the property at renewal. This includes any modification on alarms or electrical certification we may have completed in the year. We are ensuring that any additional detail we can provide about how we have looked to reduce risk is mentioned at this time.
We carry out insurance rebuild valuations every three years or when there is an change to the building outside of global trends. Underinsurance represents a real risk is to property owners. A significant underinsurance could result in “Average” being applied to a claim with a proportionate reduction in the claim payment.