Whatever the outcome, the data points to a looming crisis when it comes to subsidence

By Jon Guy 

Jon Guy

Jon Guy 

The ABI has released its latest data on the UK home insurance sector and the news is not pretty.

The headlines figures are stark, with the cost of an average claim rising by 24% in the period between 1 April and 30 June 2023. The association said claims payments are running at £8.6m per day, at present.

Published yesterday (19 September 2023), the ABI’s figures added that the cost of an average claim had now reached £4,300. 

But it is the rise in subsidence that is really underpinning the concerns of some in the market. A total of £782m was paid out by insurers to meet household claims during the period – with this figure likely to get worse.

The 21% increase in the costs of subsidence claims was put down, in part, to the effects of the 2022 summer heatwave and the claims that have come through the systems as a result.

The costs of materials are also increasing, as are problems around access to skilled labour.

Striking a balance

Mervyn Skeet, the ABI’s director of general insurance policy, said: “Home insurance continues to do what it says on the tin – support customers when the worst happens.

”Not only being the roof over their heads and the family home, for most people their house is their most valuable asset which, without the protection of home insurance, could be at risk.

“These latest figures show that despite rising claims costs, insurers continue doing all they can to offer competitively priced cover to UK households.”

That might be the case, but the impacts of changing weather patterns are taxing many in claims departments up and down the country. With September seeing record temperatures, the change to the country’s climate is becoming more pronounced.

As claims costs increase and cases of subsidence rise significantly, the industry will once again be faced with striking a balance between the need to understand and address subsidence trends and the ever-present debate over affordability of cover.

Whatever the outcome, the data points to a looming crisis when it comes to subsidence – a 21% jump in claims costs is not the direction of travel underwriters desire, but the concerns over the issue are not new and insurers will hopefully have been drawing up their response for when the cracks start to appear in earnest.

Time will tell just how widespread those cracks will be and how the market will react to the issue. It is likely to require a shift in approach almost as seismic as the problem itself.