Post on 20-Jan-2016
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General Insurance Spring SeminarFriday 21 May 2004, Staple Inn Hall
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Coping with Domestic Problems
Household Help
Spring Seminar 2004
Presented bySusan Ley and Graham Oswald
With input from Uma Baska and Cheryl Russell
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• Household insurance – what it covers• Detailed look into specific perils• Benchmarks• Current issues• Audience participation
What will this presentation cover?
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• The term ‘Property’ insurance refers to both commercial and domestic insurance.
• Household is domestic only.• Household insurance provides coverage against loss to
buildings and contents from certain perils and occupiers liability
• Coverage is to indemnify insured for the loss, subject to any limits or excesses
• Indemnity is either - Full Indemnity or New for Old
Household insurance - what is it?
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Perils - Fire
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Perils - Theft
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Perils – Weather (Flood)
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Perils – Weather (Storm)
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Perils - Subsidence
Photo courtesy of Cunningham Lindsey
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Perils – Escape of Water
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Perils – Accidental Damage
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Perils – Employer’s Liability
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Perils – Public Liability
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What trends do you think the claims cost will experience over the next 3 years, compared to the last 3 years, for the following perils?
Worrying perils
a) Accidental damageb) Escape water through Pitch Fibre pipesc) Escape water excluding Pitch Fibre pipesd) Floodse) Subsidencef) Fireg) Public liabilityh) Terrorismi) Other
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Worrying perils
Accidental damage
Escape of water through Pitch Fibre pipes
Escape of water excluding Pitch Fibre Pipes
Floods
Subsidence
Fire
Public liability
TerrorismOther
LeastWorrying
MostWorrying
Survey Results - Prediction of perils which will display the most worrying trends over the next 3 years
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Perils - Subsidence
Photo courtesy of Cunningham Lindsey
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Perils - Subsidence
• Movement of foundation due to changing ground conditions
• Principal cause is soil shrinkage around property• Seasonal pattern• Reporting of claims tends to move with housing
market• Average claim size is less than £6,000, but
substantial repair work can top £30,000
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Perils - Subsidence
• ABI agreement• If claim within first 8 weeks with a new insurer,
old insurer pays 100% of the claim• If claim after 8 weeks but within the first year with
a new insurer, old insurer pays 50% and new insurer pays 50%
• If claim after a year with a new insurer, the new insurer pays 100% of the claim
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Perils - Subsidence
• Heat wave – summer 2003• Times article 11th August• Insurers are preparing for a fivefold increase in
number of subsidence claims• How to fund increase in claims?
• Insurance Times article 21st August• Leading loss adjuster “There will be a blip, but it
will not be a huge event• This view is backed by the ABI
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Perils - Subsidence
Times article 8th April 2004
• Churchill reported a 300% year-on-year increase in subsidence claims last year, as did Direct Line. RSA also saw a 225% rise in claims.
• Although many insurers say the increased cost of subsidence claims will not be passed to policyholders, insurance brokers expect an 8% rise in the cost of household insurance policies this year.
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Perils - Flood
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Perils – Weather: Floods
• Flooding is a growing problem in the UK
• ABI flood moratorium ended 31 Dec 02
• ABI issued a Statement of Principles on the provision of flood insurance.
• Implementation dependent on various action from Government, with an annual review of progress.
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Benchmark collection
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Non subsidence claims - Paid development patterns
Benchmark collection
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
1 2 3 4 5 6 7 8 9 10 11 12 13
Development Quarter
Pa
id t
o d
ate
as
a %
of
Ult
ima
te
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Source: PwC market data
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Subsidence claims - Paid development patterns
Benchmark collection
Source: PwC market data
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
Development Quarter
Paid
to
date
as a
% o
f U
ltim
ate
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
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Non subsidence claims - Incurred development patterns
Benchmark collection
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
1 2 3 4 5 6 7 8 9
Development Quarter
Inc
urr
ed
to
da
te a
s a
% o
f U
ltim
ate
1994
1995
1996
1997
1998
1999
2000
2001
Source: PwC market data
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Subsidence claims – Incurred development patterns
Benchmark collection
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Development Qtr
Incu
rred
to
date
as a
% o
f U
ltim
ate
1994
1995
1996
1997
1998
1999
2000
2001
Source: PwC market data
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• Reinsurance• Flood• Inflation
Current issues
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Current issues - ReinsuranceThis graph plots trends in the cost of catastrophe reinsurance cover for the UK property market over recent calendar years. 2003 purchasing patterns are used to calculate the price that would have been paid each year since 1992 for the same cover. The price was then indexed to 1992 values.
Source Benfield Greig
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• Norwich Union digital flood mapping
Current issues - Flood
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Trends in average cost by peril
Source : Norwich Union – based on sub-sections of the household account
1994 1995 1996 1997 1998 19992000 2001
2002 2003
Subsidence
Fire
Weather
Escape of Water
Theft
Accidental Damage
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Current issues - Inflation
Source : RICS / BCIS
Annual Precentage Change in RPI, ABI/BCIS Rebuilding Index and BCIS Repair/Maintenance index
0.0%
5.0%
10.0%
15.0%
20.0%
1999Q1 2000Q1 2001Q1 2002Q1 2003Q1
BCIS Repair/Maintenance Index ABI/BCIS Rebuilding Cost Index RPI
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The next few slides show some incidents.
Which are generally covered by Householder’s Building and Contents policy?
Household insurance coverage quiz
?
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The owner’s dog escapes from the garden and causes a car accident ?
What about if it is the owner’s horse ?
First claim
?
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The washing machine breaks down and floods the kitchen, ruining the floor ?
Second claim
?
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A visitor trips over and injures themselves in your house ?
Third claim
?
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You collide with a pedestrian while out riding your bicycle ?
Fourth claim
?
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You accidentally reverse your car into the house and damage the wall ?
Fifth claim
?
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You lose your wallet ?
Sixth claim
?
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Any Questions?