Last month Alan Harris, consulting engineer with Civil and Structural Consulting, wrote an article in Insurance Times about subsidence claims. This challenged the conclusions made by Richard Radevsky of Resolve International in his report for the ABI on the subject.
Here, Radevsky responds to Harris and defends his subsidence corner. He says it is time to reflect on why we are in our current position and learn from the way other countries have tackled this difficult problem....
Just because subsidence insurance was introduced in the UK first, it is easy to think that we have 'the system' for dealing with it. The ABI study I undertook, however, shows that many countries face the same problem, and ours is only one of many, far-from-perfect solutions.
In the UK we spend an enormous amount of money every year underpinning foundations. Burying concrete is not the most rewarding of activities except, perhaps, for the consulting engineers who design and supervise, and the contractors who carry out the construction. In other countries where there are houses with cracked walls, there is far less worry. People buy and sell them, banks give mortgages and insurers provide insurance.
The reason why homeowners in the UK are anxious is that the system here equates cracked walls with unsaleable houses. This is not because a house with this problem is uninhabitable, or in danger of collapsing. It is because we have a system that frequently overreacts. Before subsidence insurance was introduced in the UK in the 1970s we also bought and sold cracked houses, obtained mortgages and arranged insurance.
Pre-purchase surveyors know that a house with cracked walls will be difficult to sell because it is a problem to insure and will therefore make poor security for a mortgage. Potential buyers are usually already aware of the problem, or soon discover it upon receipt of the surveyor's report. So it is entirely understandable that homeowners become anxious when new cracks appear, as these fissures threaten the value of their greatest asset.
I have never suggested that we should simply maintain that cracks are not important. In our system the threat to the value of a house is real, so my question is: should we be looking to change our system – to change the culture of anxiety? Of course there are cases where the degree of structural movement is such that extensive underpinning is required. Such cases are, however, far outnumbered by those involving only minimal movement and purely cosmetic damage.
Before insurers changed their approach in the early 1990s – a result of work by Resolve International, among others – underpinning was employed in many more cases. The change spread from one insurer to others and probably led to savings of hundreds of millions of pounds. Had this change not occurred, subsidence premiums would have been a great deal higher than they are today. Certainly the underpinning industry would be larger than it currently is, but would that really have made the UK a better place in which to live?
Alan Harris seems to think underpinning should be far more widely used, because of some cases where things have gone badly wrong. Of course, incompetent handling or unfair rejection needs to be firmly dealt with, but these cases do not justify spending huge amounts on unnecessary work or disrupting people's lives, which serves to push subsidence premiums even higher. And what about the thousands of cases where tree reduction, monitoring and crack repairs have proved a perfectly satisfactory solution? Alan Harris makes no mention of these.
If you ask a surgeon how to solve backache he is likely to recommend surgery. But thousands of us have found that alternative treatments work just as well and are far less disruptive and painful. Similarly, with foundation problems, engineers love engineering solutions.
It is not surprising that those who live by the current system seek to defend it from suggestions that a better and less costly alternative exists.
Research has put the spotlight on the alternative systems used in other countries and we need to review our system to see where we can improve. The ABI is already looking at options for better management of the problem. Insurers want to continue to provide cover for subsidence while focusing on finding the right solutions to the full range of problems, from the severe to the minor.
- Richard Radevsky can be contacted at Richardradevsky@Resolveglobal.com. He will be presenting a paper entitled "Dramaless crisis or damages for incompetent handling – Are adjusters/insurers immune from litigation?" at Litigating Subsidence Claims on Friday, 31 March at Selfridges Hotel, London.