It’s called Average or proportionate settlement. Should it be found at the time of claim that the rebuilding cost stated in the policy is inadequate then most policies have a contractual clause which allows the claim to be reduced in the same proportion that the true rebuild cost bears to the value stated in the policy. Here is not the place to discuss fair presentation of risk and the Insurance Act, but suffice to say that in most policies there is a direct correlation between the value declared at the time we take out the policy (and at subsequent renewals) and the premium paid. However, the whole principle of insurance is the benefit of the policy will be paid assuming you have paid the appropriate premium to reflect the risk that the insurer thought they were insuring. They contract with us to pay in the event of certain events happening- no ifs no buts- they pay. There is another aspect of the hardening market that is emerging in insurer’s attitude to claims.Ĭontrary to the many urban myths, Insurers do pay claims. Reduction in capacity and resultant increases in premium, have been felt throughout. Behind the scenes brokers, were working hard to get the best deals from a market in which capacity was shrinking, particularly where the construction was deemed ‘riskier’ or non- standard. Venn Diagram showing the causes that has resulted in a hard insurance market.Īlong with a rise in almost all premiums, we also began to see our property insurance premiums increase. Insurers found that the cost of their own reinsurance was increasing, and this combined with many other factors led to premiums increasing, cost cutting in insurance companies and other action to ensure that insurers remained profitable whilst still meeting their commitments to policyholders. Supply began to be outstripped by demand.
In short, we can’t live without the ‘peace of mind’ that a good insurance policy brings.Īs illustrated below, through 2019 and onwards, factors aligned to create an insurance market where capacity was reduced, insurers became more ‘risk averse’ or, choosy in what they offered cover on. BUT, if a big claim does come along, insurance could be the best investment ever made by any of us. This can, in part, be because the cost tends to rise and these days you don’t even get a piece of paper in return! Premiums are often a significant budget aspect but, statistically it is unlikely that it will ever give a return as most people don’t ever have to make a claim. Insurance is often considered a grudge purchase for householders and businesses alike. Many factors were aligning over a period, all of which were squeezing margins and forcing the large composites to become ‘harder’ rather than face losses. The insurance market was already under pressure pre Covid 19. Insurers are having a tough time, like most businesses and individuals, as we emerge into a post pandemic world. Putting it very simply, they make their living by balancing their assets and liabilities in the process delivering profits for shareholders, whilst paying claims. Most offer cover for property, motor, health, liability, engineering etc as well as owning their own property portfolios. The majority of well- known insurers in the UK are multi-national, composite businesses with hugely diverse operations. Martyn Barrett BSc MRICS ACII FCILA FUEDI-ELAE, Director, Barrett Corp & Harrington
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