Iprism in the news – How can Home Insurance adapt to meet the needs of today’s customers?

Escalating claims costs, new technologies, and an alternative accommodation crisis; how can home insurance evolve to meet the needs of our customers today?

Our Chief Underwriting Officer, Aaron Woodhams, joined Alison Unwin, Director for Home Adjusting and Domestic Major Loss at Sedgwick, for a new Insurance Post podcast. During the episode, they debated some of the latest challenges facing home insurers and discussed the ways the industry can evolve to support our modern customers.

Testing the limits

According to Aaron, Home Insurance policies are currently being tested to their limits by a number of factors. Extreme weather that now seems to be the norm, rising claims from flood and storm and claims arising from faulty green technology are all contributing to rising claims costs, he explained:

“We need to make sure we’re always at the forefront of these issues to ensure our approach to pricing is correct for all of these factors. Fundamentally, insurers are having to rethink pricing and pricing strategies to ensure we are offering our clients fair pricing.”

Alison agreed, also highlighting the changing nature of risk both inside and outside the home, for instance, chip pain fires. These used to be a major cause of fires in the home, but over the past fifteen years, incidents have dropped significantly, certainly since the boom in popularity of the air fryer. However, in their place is the growing concern of Lithium-ion battery fires, which have become a major source of concern for insurers and a potential ticking time bomb in the homes of policyholders.

Alternative accommodation

Another major challenge facing insurers, certainly in recent years, is the rising cost of providing alternative accommodation for policyholders, Aaron says:

“Alternative accommodation is one area where we’re seeing a massive hike in claims costs. We underwrite a huge number of high-value home policies; in these cases, policyholders require a certain standard of alternative accommodation, and many of our elderly policyholders have specific requirements which we have to take into account.”

Added to this is the pressure of the current housing situation in the UK. Alison commented that there simply aren’t enough rental properties, so finding adequate alternative accommodation in a policyholder’s area is becoming almost impossible in some cases.

Both Aaron and Alison agree that, as an industry, we must look at new ways to support customers if alternative accommodation is required, whether that’s by finding ways to keep the customer (safely) at home while short-term works are being carried out, or looking for new longer-term solutions.

Underinsurance challenges

It wouldn’t be a discussion about home insurance without reference to underinsurance, a problem that shows no signs of going away.

With the Government’s drive to create more sustainable housing, Aaron warned that skilled labour shortages and the cost of these sustainable materials are leading to many policyholders significantly underestimating the rebuild cost of their property, commenting that “rebuild costs are rising at astronomical levels”.

But it’s not just properties themselves at risk of underinsurance. Aaron and Alison both point to the growing challenge of underinsurance in contents. Aaron cautioned that, “with the way things have evolved over the past ten years, certainly in respect of smart homes, new technologies and gadgets, it’s vital that insurers do a full inventory of contents to ensure adequate sums insured.”

What can we do?

Concluding the episode, Aaron shared his views on how we as an industry can rise to some of these challenges and support our policyholders. He finished:

‘Education [KP1] and communication are vital. As a wholesale MGA, it’s our job to work closely with our broker partners to ensure they fully understand these challenges and can give the right advice to their customers. Whether that’s organising a desktop or site survey to better calculate sums insured, or doing a full inventory and valuation of contents.’

Listen to this episode of the Insurance Post podcast here (subscription required): https://www.postonline.co.uk/personal/7959041/is-home-insurance-fit-for-the-future?ref=search

Find out more about our Private Clients product and high-value home solutions here: https://www.iprism.co.uk/private-clients

[KP1]I‘ve paraphrased this one as I felt we needed a strong conclusion, so have pulled this together from different points in the recording (all Aaron’s views though)