Why Have My Insurance Premiums Increased?

Darren Bagnall of Flat Living Insurance looks at some of the reasons block insurance has increased in recent years.

We’ve been hearing this question a lot lately and the short answer is always “because the industry has entered into what is known as a ‘hard market’ for property and commercial insurances”. But for those not familiar with such terms, this doesn’t really help clear up the confusion!

So, for anyone facing a higher renewal quote than expected, we thought we’d clarify what has actually pushed prices up through 2021 and into this year.

What Does ‘Hard Market’ Mean?

A generally tougher attitude to risk and pricing across the breadth of the insurance market has pushed us into a ‘hard market’, which simply means that demand is currently exceeding supply.

2021 saw more claims than usual and the cost of those claims increased due to various factors including:

• Lack of availability of contractors
• Widespread increase in the cost of raw materials (more on this below)
• Higher costs for alternative accommodation due to a housing shortage

The effect has been felt by many providers so severely that they have simply stopped offering residential property insurance due to the losses they have experienced recently. The insurers that continue to offer cover have had to increase their premiums in an attempt to remain profitable.

The Cost of Reinsurance Has Increased

Companies are also facing higher costs for reinsurance (the cover insurance companies take out to cover themselves against major losses that may affect their ability to pay out for valid claims). This has been a general increase across the market due to significant international events; most notably, the Covid pandemic, but also due to large-scale fires and storms.

Storm and flood frequency and severity have increased both nationally and internationally- resulting in insurance companies paying out far more in claims than they have in previous years. This has forced many companies to increase their premiums to remain solvent.

Higher Costs for Raw Materials

A combination of both short and long-term factors such as Brexit, world commodity prices, the pandemic and just general supply and demand have resulted in increased costs in this area.

For a very long time, indexation (the method by which the sum insured is adjusted in line with inflation using data from several sources) has been as low as 3%. In some cases, there has been an increase to 7% or higher.

Declared Value Accuracy at Renewal

It is vital to make sure your declared value is always adequate to cover the cost of completely rebuilding your property when you come to renew your policy.

Each block of flats insurance premium is determined by the potential cost to the insurer in the event of a claim. We will re-underwrite your policy at each renewal based on the information that is shown on your statement of fact to make sure you are obtaining a premium that is suitable for your property.

It is never advisable to minimise your declared value- you could find yourself in huge trouble in the event of a claim.

What Can You Do to Keep Premiums to a Minimum?

The key here is to be proactive in both your preventative measures and in volunteering information about your block.

Some great examples are:

• If you’ve had a claim, provide us with evidence of the measures you’ve taken since to minimise the risk of the same issue occurring again
• If you’ve had a Rebuilding Cost Assessment, let us know and provide the report
• If you’ve had a Fire Risk or H&S Assessment completed, let us know and provide the reports alongside any evidence of measures taken on the back of their advice
• Let us know if you have any additional features in place to reduce risk in your block such as an automatic fire alarm, CCTV, sprinklers or a door entry system

All of the above can lead to your insurer to provide a discount on your premium.

Flat Living Insurance provides specialist insurance policies for blocks of flats and apartments. For more information or a quote, please contact a member of the Flat Living Insurance team on 0333 577 2044.