Story for The Times: Home insurance - is bad and extreme weather driving up people's premiums?

Recent data points to a staggering 9.3% escalation in average home insurance prices within a quarter – a striking climb second only to the record set in 2014. Insurers seem to be grappling with an unprecedented wave of claims, underscoring the trade-off between climate shifts and financial stability in the present market. As portfolio landlords, we have seen our building insurance bill go up by 10-15% this year on landlord insurance products.

This unsettling trend follows a year of plunging home insurance rates, a period that now stands in stark contrast to the havoc unleashed by the tempestuous weather. While homeowners and landlords grapple with mounting mortgage repayments, escalating energy bills, and surging food prices, the ABI's warning of mounting subsidence claims and frozen pipe payouts are stoking the flames of premium inflation further. I expect this interplay between climate turmoil and financial security to continue to remain centre stage over years to come.

It makes perfect sense that increased claims costs will translate to increased premiums. Of real concern is the potential for cover to be excluded from policies, which we have seen with flood cover in some areas previously. The issue this creates is two-fold; an exclusion to the cover can be hidden in the T&C's and not made obvious at the point of purchase, especially in non-advised online transactions, meaning customers are unaware of the lack of cover until, it is too late, and they need to claim. The second issue is that a policy with no subsidence cover would put the client in breach of their mortgage conditions, as lenders make it a legal obligation that borrowers have adequate building insurance in place at all times, which must include things like flood and subsidence - so people could find they are both uninsured for a very serious and costly repair, as well as finding out they are in breach of their mortgage terms. Take professional advice if you are in any doubt.

This kind of activity is cyclical and from longstanding experience is how the general insurance market regulates its risk at times when there is a demonstratable spike in unexpected claims. It's quite a fair scenario for insurers to ask more questions to attempt to protect themselves in uncertain conditions. Some insurers might react in a knee-jerk way and increase premiums, increase excess payments, or indeed refuse to cover certain postcodes of concern of subsidence - however, on the plus side, there will usually in the UK be another insurer who will take up the slack and continue to offer terms to gain market share. It's kind of how it works.

Home insurance premiums as a whole have increased this year and this is due to the increase in property claims as well as the rising cost of materials and building work. 2022 had bouts of extreme weather, from the heatwave last summer to the big freeze in December. As a result, building claims, and in particular subsidence claims, skyrocketed. Subsidence, landslip and heave are the most costly claims to pay out for and an increase in these types of claims will have an impact on the next year's renewals. While not all customers would have claimed, insurers increase premiums as a whole to cover the cost of claims for the coming year so that everyone can be covered adequately.

It does seem that prices have been on the increase but what is unclear is just how much of this might be down to inflation instead. A trip to B&Q will tell you that materials are a lot more expensive than a few years ago so it stands to reason that if your house falls down, it costs more to rebuild on average, so it costs more to insure.