A reduction in claims costs across UK household insurance is set to partially offset the large weather losses faced in 2020, according to a new report from Fitch Ratings.
According to the group, the sector still “remains vulnerable” to further weather losses over the remainder of the year, however.
The group noted that insurers could still benefit from the reduction in claim costs that has followed lockdown, with the majority of the population now working from home for the remainder of the year.
According to Fitch, this could lead to earlier detection of burst or leaking pipes, which accounts for 76% of all escape-of-water (EoW) claims.
The earlier detection and notification of such claims will help to limit the cost of damage and further drive down the cost of EoW claims, which has previously been a leading factor for increasing claim costs for household insurers.
This reduction in claim costs could offset an increase in the number of claims from other sources, such as accidental damage, that could arise with people spending more time in their homes.
Overall, Fitch predicts that the benefit insurers would derive from a reduction in claims costs will help to counteract weather losses that were seen in the first quarter of the year, following storms Ciara, Dennis and Jorge.
Flooding is the “most common and costly kind of natural disaster” in the UK household insurance market, with February storms resulting in losses of £523m in the first quarter of the year.