1. 1 General Insurance Spring Seminar Friday 21 May 2004, Staple Inn Hall

2. 2 Coping with Domestic Problems Household Help Spring Seminar 2004 Presented by Susan Ley and Graham Oswald With input from Uma Baska and Cheryl Russell

3. 3 Household insurance – what it covers Detailed look into specific perils Benchmarks Current issues Audience participation What will this presentation cover?

4. 4 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?

5. 5 Perils - Fire

6. 6 Perils - Theft

7. 7 Perils – Weather (Flood)

8. 8 Perils – Weather (Storm)

9. 9 Perils - Subsidence Photo courtesy of Cunningham Lindsey

10. 10 Perils – Escape of Water

11. 11 Perils – Accidental Damage

12. 12 Perils – Employer’s Liability

13. 13 Perils – Public Liability

14. 14 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 damage b)Escape water through Pitch Fibre pipes c)Escape water excluding Pitch Fibre pipes d)Floods e)Subsidence f)Fire g)Public liability h)Terrorism i)Other

15. 15 Worrying perils Accidental damage Escape of water through Pitch Fibre pipes Escape of water excluding Pitch Fibre Pipes Floods Subsidence Fire Public liability Terrorism Other Least Worrying Most Worrying Survey Results - Prediction of perils which will display the most worrying trends over the next 3 years

16. 16 Perils - Subsidence Photo courtesy of Cunningham Lindsey

17. 17 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

18. 18 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

19. 19 Perils - Subsidence Heat wave – summer 2003 Times article 11 th August Insurers are preparing for a fivefold increase in number of subsidence claims How to fund increase in claims? Insurance Times article 21 st August Leading loss adjuster “There will be a blip, but it will not be a huge event This view is backed by the ABI

20. 20 Perils - Subsidence Times article 8 th 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.

21. 21 Perils - Flood

22. 22 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.

23. 23 Benchmark collection

24. 24 Non subsidence claims - Paid development patterns Benchmark collection Source: PwC market data

25. 25 Subsidence claims - Paid development patterns Benchmark collection Source: PwC market data

26. 26 Non subsidence claims - Incurred development patterns Benchmark collection Source: PwC market data

27. 27 Subsidence claims – Incurred development patterns Benchmark collection Source: PwC market data

28. 28 Reinsurance Flood Inflation Current issues

29. 29 Current issues - Reinsurance This 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

30. 30 Norwich Union digital flood mapping Current issues - Flood

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37. 37 Trends in average cost by peril Source : Norwich Union – based on sub-sections of the household account

38. 38 Current issues - Inflation Source : RICS / BCIS

39. 39 The next few slides show some incidents. Which are generally covered by Householder’s Building and Contents policy? Household insurance coverage quiz ?

40. 40 The owner’s dog escapes from the garden and causes a car accident ? What about if it is the owner’s horse ? First claim ?

41. 41 The washing machine breaks down and floods the kitchen, ruining the floor ? Second claim ?

42. 42 A visitor trips over and injures themselves in your house ? Third claim ?

43. 43 You collide with a pedestrian while out riding your bicycle ? Fourth claim ?

44. 44 You accidentally reverse your car into the house and damage the wall ? Fifth claim ?

45. 45 You lose your wallet ? Sixth claim ?

46. 46 Any Questions?