UK household: floods, inflation and under-insurance. Working party report

Document description

With the exception of the severe floods in October 2000, recent Household claims experience has been benign. However, this is deceptive; the underlying cost of Household claims has been increasing rapidly, fuelled by rising domestic consumption and a shortage of skilled labour to perform building repairs. The rapid growth in Household costs has been offset in recent years by declining theft and subsidence claims. These have now stabilised. We believe that Household claims costs per policy will start to rise strongly, and that substantial premium increases are going to be required to maintain the current level of profitability within the UK Household insurance market. The traditional approaches to indexing Sums Insured for Buildings and Contents cover have failed to capture the growth in insured risk within the market in the last decade, and as a result we believe that the UK Household market is systematically under-insured.