House insurance - the past subsidence trap

manwithaninsuranceproblem

Hi,
I own a house that was underpinned some twenty two years ago, before i bought it.

The work was effective, was certified by a respected engineer, and has not moved since.

When I bought the house I understood that the current insurer was legally obliged to continue insuring the property, but that other insurers might not agree to cover subsidence.

Sadly, this state of affairs has lead to the existing insurer hiking the premium above market levels with substantial rises each year.
This year they want £1300 for my five bed house, which has some tenants upstairs as well as myself, and a rebuild cost of about £250 000, and a market value of about £800 000.

This year I found another insurer prepared to cover me under a comparable policy, WITH SUBSIDENCE COVER (albeit with a £3000 excess applying to subsidence work) for a premium of £550. The potential new insurer has been shown details of the historic insurance work and engineers cert, though no new survey was undertaken.

While this lower offer is attractive, I have to consider the possibility that, by changing insurer, I may risk the new insurer or other future insurers changing their mind, and leaving me with no subsidence cover. I don't think they are under legal obligation to cover for subsidence if i change insurer. This could be problematic if i try to sell the house with no subsidence cover. I presume that would knock £50 000 off the asking price, to cover the new buyer for uninsured risks.

Against this, i have to consider the disadvantage of paying around six hundred pounds a year plus (and rising) EXTRA over the next couple of decades, or possibly the rest of my life.

Has anyone had any experience of trying to escape the 'historic subsidence' trap?

What would your choice of action in this situation be?

Is there any other means whereby i might escape having very high premiums applied at will by my existing insurers, such as an ombudsman or trading standards body?

Has anyone found they are able to change supplier and consistently get cover for subsidence having done so?

I am finding it difficult to get a clear picture of the legal situation here.

Thanks very much if you can throw any light on this.

with regards
manwithinsuranceproblem

dacouch

You're correct to be concerned about the outside chance of a new Insurer suddenly deciding no longer want to offer subsidence cover.

I think you would find a new buyer would expect a larger discount than £50k as in effect it would be unmortgagable so you would limit your market to hard negotiating cash buyers.

I've had plenty of customers in a similar position to you, what is worth looking at is ways of reducing your premium. Your premium is much larger than normal which means the discounts the Insurers offer will knock very large amounts off your premium.

I often find customers can add their contents cover on in effect for free, this is because the discount for combining them is circa 20% as your contents premium is probably below £250 the 20% discount negates the extra for contents cover.

Also look at increasing your non subsidence excess, if you say increased your buildings excess to £500 total, again this can generate a discount of between £100 and as much as £300. Although you will have a large excess, it will in effect have cleared it's cost if you don't claim for a couple of years.

Bear in mind you need to regard your buildings cover as disasters eg you don't want to be claiming for the sub £1000ish claims as it will increase your premium so increasing your excess can make sense.

Give your current Insurers a call, be really nice to the person you speak to and ask them for suggestions to reduce your premium. They may also have other suggestions.

I'm guessing your with an Insurer through your mortgage provider, sometimes a broker can offer exactly the same policy with the same insurer along with a letter from the Insurer confirming they will continue offering cover if you keep renewing and agree to transfer cover to a future buyer. If the mortgage provider has changed Insurers since your claim the new company may not play ball as in this case they only took you on as a customer due to the mortgage provider requiring all exisiting customers to be offered cover as part of the transfer.

It's worth trying especially if you're with someone like Aviva, avoid Swintons though.

FlameCloud

From memory Legal and General only ask about subs claims in the last 15 years, you could try them.

manwithaninsuranceproblem

Thank you both very much for your helpful replies.

daCouch, Unfortunately I am with Swinton!

However i shall try the idea of altering the excesses to see if that helps.

Also, i find from a past newspaper article that there is an broker specialising in this problem that will resurvey your house for £150, seek to find you a new longterm deal (avoiding the problem of having subsidence cover dropped at your next renewal), and they will refund your survey costs if they fail to find anything.

Thanks again for your help.

Apologies if i have posted two replies, the first i tried seems not to have shown on the forum.

regards

dacouch

The company you've read about is http://www.bureauinsure.co.uk/ I've had dealings with them ad they're very good.

Which Insurer are you with?

Another option is to go into another local broker, try an olde worlde one, if they deal with the same Insurer as Swintons are using, they may be able to transfer the policy to them. They will recieve about 18% commission on the premium so may be willing to knock circa 9% off the premium each year. It only involves you signing a letter although I would recommend you ask for a letter confirming the subsidence and all rights eg keep renewing etc is issued so a proper record is kept as your subsidence claim is quite old. If you do this Swintons will not be very happy so you won't be their favourite person

manwithaninsuranceproblem

Very interesting. The policy offered by Swintons is from Legal and General. I've already got their quote down by about four hundred pounds by suggesting an alteration in the excesses, so your advice in your first response was very good, thanks.
i still find myself a LITTLE confused by some of the modalities of how this works, especially, how easily is the 'guaranteed renewal of subsidence' clause transferred or negotiated to new or different insurers.
The small independent agent who offered me a deal with Liverpool and Victoria seems to be trying to have me believe that the legal obligation to retain cover when renewing in subsequent years is not so important, and is not all it's cracked up to be... but i am not convinced by this. He is certainly not offering to try and broker a long term deal where cover for subsidence is guaranteed in future years.
The advice of perhaps talking to some smaller brokers is possibly my next move.
in the meantime, i'm hoping i may get an even lower quote from my existing brokers having had my case handed to 'another department'....
thanks for your insights

dacouch

manwithaninsuranceproblem wrote: »

The small independent agent who offered me a deal with Liverpool and Victoria seems to be trying to have me believe that the legal obligation to retain cover when renewing in subsequent years is not so important, and is not all it's cracked up to be... but i am not convinced by this. He is certainly not offering to try and broker a long term deal where cover for subsidence is guaranteed in future years.

He's wrong, it's incredibly important, it ensures you can always get cover and when you sell the house it can be passed onto the new owner.

I've seen a couple of standard companies accept properties with previous subsidence, one was a specific decision to start accepting and the other was due to a badly worded question which created a loop hole for subsidence properties.

Both of these Insurers started getting a higher incidence of subsidence claims from these customers (The claims are well into five figures). The result was one started declining renewals, the other did not realise they were accepting underpinned properties. They discovered each case when the owner rang up to obtain a letter confirming they would transfer cover to the new owner which buyers solicitors normally require when they are aware of subsidence. They then refused to issue the required letter as they would not offer cover to the new owner. This happens just prior to completion and I had quite a few customers who had told me how great the new deal was and ignored my advice ringing in a panic asking for cover asap.

The first thing you do is ring the original Insurer, the chances of them accepting them back as a customer are basically zero. The Insurers agree to offer cover all the time you remain loyal, if you go elsewhere they do not and very very rarely will agree to accept you back. The Insurer would rather not cover a property they paid out a subsidence claim as they can be very high risk of a claim to an Insurer. They offer cover as they have to, if you break the bond they are no longer bound to.

L&G are coincidently one of the companies who have just started accepting underpinned properties if they've been incident free for a set number of years.

You should find a broker who can offer a transfer of your L&G policy to them, it should even keep the same policy number

manwithaninsuranceproblem

Fantastic, you've made it very clear thanks. This is what I'll try.
Somewhere in all of this, you've got to hope that some kind of logic will prevail.... i have been buying overpriced insurance for years, and have never made a single claim. Meanwhile, my neighbours have a house on adjacent land, but have had no underpinning, and pay about five hundred for insurance including subsidence cover....and for all i know, may claim for all kinds of things, and would, through common sense, appear to be a greater subsidence risk than myself since they are not sitting on a big chunk of concrete signed off by a respected engineer. You just have to hope that some kind of practical market logic and common sense logic will apply at some point - if there is any competitive instinct within the market, you would think that some clients like myself who effectively exist as cash cows and have a lower claim risk than their neighbours may eventually be offered some real choices. What you are saying about L and G considering properties that have had no movement for a long time, and the instance of the company seeking to cover people after a renewed survey suggests there may yet be some hope.
with regards

dacouch

As I mentioned before Insurers really don't like properties with previous subsidence, they offer cover to their own claimers as they have too.

You get a much higher incidence of subsidence again on properties with previous subsidence.

Insurers like to be able to predict their future claims and set aside money to pay claims. If they have a lot of underpinned properties on their books they dread especially long hot summers as it can cause a spate of claims. They also hate housing booms as the increased amount of people moving and thus having surveys carried out on their homes increase subsidence claims as the surveyors pick up on subsidence the owner missed. They don't have this uncertainty with normal customers who claims are triggered by predictable issues such as storm, fire and flood etc.

Subsidence claims can easily run into tens of thousands, the biggest I seen was £250k and I've seen dozens between £80k and £100k.

If there was a gap in the market Insurers would jump at it, as I mentioned before I've seen it before and that time the Insurer got their fingers burnt and dropped put of the market leaving their customers in the lurch. Legal & General and LV have recently started accepting underpinned properties in certain circumstances. They're both reptable companies with good company ethics, if they get their fingers burnt and decide they want out I'm not sure whether they will keep offering cover or will leave their customers in the lurch. No one can guarantee you they will. If you get a letter from them confirming they guarantee to keep offering cover you are 99.9% guaranteed.

Personally I would not chance it, however I'm risk adverse due to my job and having the sneaking doubts of what if.

You have the information to make your own informed decision.

If you're pushed for time or want to see if LV and L&G keep accepting underpinned properties then you have the option of renewing status quo and using the year to get your research in and make your decision.

manwithaninsuranceproblem

Well well well, it seems there may be plenty more to research regarding this question dacouch.

As i said earlier, i ended up renewing with my existing insurers (via swinton) because i was running out of time, had managed to get some reduction by altering the excess rates, and (most importantly) I had no guarantee that cover for subsidence would necessarily be offered by the company offering cheaper insurance this year that was offered by the small independent broker i had found via an acquaintance.

After explaining that i was renewing with my existing insurers, the small independent broker who had found me a cheaper quote has now sent a (pleasant and polite) email in which he says he fully understands the reasoning behind my course of action, but questions whether my existing insurers ARE in fact in any way legally obliged to renew my cover for subsidence. He even goes so far as to say he thinks i may be being lied to, or that there may be small print i am unaware of.
He suggests I ask for written confirmation of the obligation to renew for subsidence, and also specifically whether there is any obligation to provide subsidence insurance for any new buyer.


He says that there are only three types (Motor, Employers Liability & Horse Liability) of cover that you must have by law, and none of them are to do with property. He says that the last insurer of one of these is only legally obliged to offer terms at renewal IF THE INSURED CANNOT OBTAIN THIS COVER FROM ANOTHER INSURER. And says that since I have clearly found i can obtain subsidence cover from another insurer no legal obligation is binding on my current insurer.

Extraordinary.

I was wondering if, by any chance, you have any knowledge or details of any legal acts or provisions which would apply in this case? Surely if it is true, even without referring to the insurers (which i may well do), you would think that the legislation or code of practice that covers this would be identifiable and possible to refer to?

Have you any ideas on this?

Thanks as ever for your views

huckster

Suggest that you do some research into issues of changing Insurers, when there is a previous subsidence issue. Sometimes it is worth having continuity of cover with the same underwriter that dealt with the original claim, as they will normally continue the cover at a price and offer cover with subsidence to purchasers of your property. If you change Insurers, sometimes problems can arise if further movement is detected. There is an ABI agreement if you change Insurers and brand new subsidence issue is detected, but for your property you may get involved in argument as to whether it relates to the previous problem.

Have a read through this from the FOS.

http://www.financial-ombudsman.org.uk/publications/technical_notes/building-subsidence.htm

Depending on who the actual Insurance underwriter of the policy is through Swinton, you may be able to approach that underwriter directly or via another broker/intermediary, to see if they can provide a cheaper quote. Swinton will be buying in the Insurance at a wholesale price and adding their amount on top. By going to the same underwriter via another route, you may be able to get a cheaper premium, but still enjoy continuity of cover. The new broker/intermediary with the permission of the underwriter, should be able to note the new policy, that the subsidence cover is a continuation of that provided under policy 12345 via Swinton. I have done this on numerous occasions for clients in the past, so it should be possible.

As someone else has pointed out, Legal & General should be able to provide cover, as they don't appear to be concerned with subsidence more than 15 years old. But I would suggest that you discuss any quotation request with them, so they have the full details and you are reassured that they can provide you with full cover, so any future claims would not be a problem.