Motor rates soared last year, to consumers’ dismay. This year, household could be forced to spike
Household insurance is often the forgotten step-sister of motor. As a discretionary purchase, it causes far fewer national headlines and excites much less outrage. But two stories this morning suggest that household could be about to take its moment in the limelight – for all the wrong reasons.
As we report, AXA has identified a surge in exaggerated household claims. The insurer’s research shows that only 45% of people consider an exaggerated claim to be dishonest. This demonstrates a general antipathy towards insurance and a misunderstanding of how it collectivises risk. Policyholders who exaggerate claims think they are getting one over on their insurers. If they understood that, in fact, they were increasing their premiums and those of people like them, their opinions would probably change.
As those in the industry know, making an exaggerated claim is nothing short of fraud. If AXA’s estimate of a 17% rise in incidences of exaggeration year-on-year is reflected across the industry, insurers will have no opportunity but to take action. This will inevitably result in higher premiums and more stringent fraud controls.
Meanwhile, the Building Cost Information Service has warned that leaseholders within blocks of flats are often woefully under-covered in their buildings insurance. This highlights the lack of awareness that characterises the general public’s view of household insurance.
The public will notice if their premiums double, though. Last year’s outcry over motor premiums could have been predicted by anyone in the industry years before, as it was clear that rates would have to eventually spike to push the market back into profit.
A similar, if smaller, pressure is currently on household rates. They will continue to rise this year, creating yet more negative headlines. This will not help the insurance industry when it comes to the crucial negotiations with ministers over the agreement on flood defence and insurance: another factor that could drive up rates.
Last year, it was motor. This year, household could become the industry’s bête noire.