Six risks in a hardening insurance market and how to avoid them
As a landlord you may be aware that the insurance market is currently hardening. After many years of a relatively ‘soft’ market (competitive premiums, relaxed criteria, and wider cover), claims costs have risen compared to premiums. The net result of this is that premiums and excesses are increasing. This is a natural cycle for the insurance market; it’s happened before and it will happen again.
In a hardening market, it’s crucial that you check your insurance cover properly to ensure you’re fully protected. While you may be tempted to cut costs by reducing coverage, that’s the worst thing you can do. Here’s everything you need to know to stay ahead of the curve and avoid hefty payouts.
The six risks to avoid in a hardening market
1. Standard excess is increasing
To avoid a nasty surprise, the first thing you need to do is check the standard excess on your landlord insurance. Prior to the market hardening, the average standard excess was anywhere between £230- £260. As the market changes, however, some insurers will increase their standard excess to £350 – but it could be as much as £500.
At Hamilton Fraser Total Landlord Insurance our standard excess is £250, and despite the hard market, we’re keeping it the same. To find out if your insurer is increasing their standard excess – and by how much – ask them; It’s always best to be proactive and get ahead of any changes.
Once you have an idea of any increase in standard excess, you can consider your options. Of course, one option is to shop around for a more competitive provider (although, as point five explains, this may prove unfruitful in a hard market). Another is to consider increasing your excess to £500 or even £1,000; this will reduce your premiums without affecting your level of cover – an option which makes sense if you rarely make claims.
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2. The impact of extreme weather on premiums
One of the factors that contributes to a hardening market is an increase in natural disasters and environmental damage. As a result of climate change, extreme weather events (such as floods and fires) have been increasing steadily over the past few years.
In the year which brought the pandemic – and subsequent social and economic devastation – 2020’s weather was perfectly on brand. Last year saw 10 named storms, doubling the 2019 figure of five.
In 2020, Storms Dennis and Ciara alone resulted in an estimated cost of over £500 million to insurers. Here at Hamilton Fraser Total Landlord Insurance, we experienced a 95 per cent increase in storm claims compared to the previous year. This dramatic rise in claims is one of the primary reasons landlord insurance providers are increasing their premiums.
3. Cover reductions
With changes to your insurance, it’s crucial that you check the small print. Make sure you understand all the terms, conditions and, most importantly, the exclusions.
Even if your standard excess hasn’t changed, there may be reductions in coverage.
For example, you might find the new terms leave you exposed to malicious damage by tenants or their guests.