Comment & Analysis

How Covid changed the home insurance market

From hot-tub mishaps and bonfire disasters, the market has seen a rise in some surprising claims, and a shocking drop in others

In the past year, travel and car insurance claims in the UK fell to historic lows as the nation remained trapped in a cycle of lockdowns, rendering consumers homebound. With remote working in full effect, renewed emphasis on the home insurance market has come into effect.

One of the more unusual trends in home insurance over the past year has been the rise in claims involving hot tubs. According to research carried out by Aviva, there was a year-on-year increase of 188%, in relation to accidental damage claims for hot tubs in 2020. Kelly Whittington, the insurance giant’s property claims director, identified the dramatic uptake in hot tub claims was due to consumers wanting to “enjoy holidays at home” while being stuck during the pandemic.

Similarly, LV= General Insurance recognised a 225% increase in fire claims specifically relating to bonfires, as well as a 21% increase in the proportion of bicycle thefts from gardens, since the first lockdown in March 2020. However, the insurance provider also revealed there has been a decrease in some claims, specifically a 34% drop in claims involving home burglaries.

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Speaking on the statistics, Martin Milliner, claims director for LV= GI, said: “Since the first lockdown in March last year, many of us have been spending more time at home, and our home insurance trend data certainly reflects that.

“Being at home more often means we’re more likely to drop things and have accidents inside, whereas we’ve seen a decrease in claims from outside the home such as accidental loss. It’s also encouraging to see a decrease in burglary claims.”

Brian Hodge, the insurer’s customer claims director, identifies the correlation between accidental damage claims and children being stuck at home. “In the beginning of the year, with many children being home-schooled, we did see an increase in accidental damage claims such as spillages, which reached a record high in January,” he says.

“Now that children have gone back to school, it’s likely we’ll see this type of accident decrease. We may also see claims for breakages of audio visual and computing items decrease as the workforce starts to move back into offices at some point this year.”

According to data from the Association of British Insurers (ABI), Covid-19 lockdowns have resulted in significant reductions in various forms of crime, including burglary. Statistics from the trade body revealed home insurance claims for theft fell 44% in 2020 compared to 2019, and the value of burglary claims were reduced by 30%.

While conventional burglary-related claims have fallen, Nick Wilmot believes the type of theft affecting consumers has changed due to the pandemic. Wilmot, head of Home for financial services analyst provider LexisNexis Risk Solutions, is considered a respected expert on the home insurance market and author of the 2020 PL3 CII Home Insurance textbook.

“With people working at home, we are now online even more than prior to the last 12 months,” he says. “Whilst that kind of physical theft (burglary) may have reduced for the short term, who knows what will happen over the long term.

“It’s pretty safe to say, in terms of cyber-related theft, Covid has obviously given a great opportunity for people that want to exploit that with various scams. Some home insurers have reacted to that with cyber cover being embedded into their products.”

Wilmot is cautious of the oncoming “economic uncertainty” after the country’s latest lockdown and the wider implications for home insurers. “Insurers need to be on the front foot and alert to any kind of fraudulent behaviours from customers,” he says.

“In terms of home insurance, it’s significantly transacted online and that’s just going to be accelerated even further with what we’ve seen. There’s going to be a lot more focus on the type of cover, and it’s going to be interesting to see how home insurers respond. Working from home, what new risks does that bring and do policies respond appropriately to that?”

Neill Slane, senior vertical manager for claims at LexisNexis Solutions, is aware of the “interesting position” home insurers find themselves in the wake of Covid. In his role with the analytics firm, Slane regularly talks to home insurers in order to understand what they are seeing in the market.

On this particular issue, Slane recognises theft claims will “take quite a while” to return to their pre-Covid levels. “Another thing to recognise as well with those theft claims, regarding property, is that the target of theft has potentially changed during this period of time,” he says.

“We may have seen some of the criminal activity being put towards empty residential units, for example, and it’ll be interesting to find out from that perspective, what way the market has gone in the last 12 months.”

Due to the nature of claims during the pandemic, home insurance providers have been able to respond swiftly to meet consumer needs, according to Slane. “There may be an increase in the potential for an issue, but because people are at home, they’re able to react much quicker so that’s a mitigating fact.”

Looking to the future, Slane believes weather-related claims will become more prominent within the home insurance market. Prior to March 2020, the UK was dealing with the impact of Storm Dennis and flooding in England; two events which were felt by insurance providers as well as homeowners. While the market has completely changed in the past year, for Slane these sort of claims will be a return to form.

“Suddenly, when lockdown happened, there was an issue for the home insurers about how they could actually get contractors out to assess these claims,” he explains. “Some of those insurance providers will have faced issues of those claims potentially staying open longer than they would have liked.

“Some of the compensation they had paid may have been higher because the issue degraded over the period of time. Weather-related claims is an area where a lot of our clients are talking to us and are interested in existing ways that we can help them in mitigating some of those losses.”

 

 

 

 

 

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