How on earth do Home Insurance Prices rise like this?!

Max68

Well received a response from my querying the massive increase and was told that " "the quote is based on their (underwriters) assessment of the risk of you making a claim. This is based on their own claims experience and data they receive from outside sources. At each renewal, they’ll re-assess the risk based on the most recent information we have, and this can result in a difference in price from the previous year."  -  Just a pity that there is no transparency as to what this "risk" is in the opinion of that particular underwriter.

Interestingly using my own details and leaving most questions answered the same I did several quotes on the Co-Op website but just adjusting post codes and addresses.  Most homes in my road are priced astronomically between £1500 and £2200 so it is clearly a post code issue rather than a personal one.  Homes on the other side of the stream, but closer to it, in another road had quotes of around £450.  Two roads that I know homes have flooded in the past in a neighbouring town were available to insure for around £600. Then I picked addresses close to rivers in two towns around 10 miles away who had severe flooding for several years and yet they were insurable once again for around £650 and yet these are still in high flood risk areas!  So, by logic the reason for my price increase cannot be flooding.  I even put in my late mother’s house a large four-bedroom detached house with a history of a subsidence issue and yet they would insure that for around £650!

The only thing I can think of is that some residents in this street have had building work done with extending their homes rather than move elsewhere, that maybe has increased claims made in our street?  But whatever the reason it's a shame that you never find out why.

DullGreyGuy

Insurers buy data models like RMS, EqeCat and AIR which you feed in data about the risk you are considering insuring and it brings back what likely losses are in various time periods (eg 1 in 5 years, 1 in 50 years, 1 in 200 years). Some insurers take the numbers as provided, others may adjust based on their own experience of the accuracy of the model. 

The models these tools use are typically updated every few years and from personal experience it is often a big task to implement the changes because there can be very big swings in numbers between one version and the next which leads to difficult questions on if you really want to charge an extra £100k to a long standing customer who's been claim free for decades or if you really want to half your quote for a shopping centre you've always felt was too risky to take on. 

With flood in particular the coop's pricing will depend on who's on the AIS panel and if they do or dont subscribe to Flood Re. If their panel has changed and none are subscribers then you'd expect premiums to spike as you are substituting real risk pricing for the former fixed price flood cover. 

As an intermediary Coop/AIS may be equally blind to the pricing as you are, some insurers are fully open and give their intermediaries the rating logic and at the other extreme some simply have an API and all the broker gets is a single figure price in the same way you do when you go onto a website for a quote. 

Max68

DullGreyGuy said:

Insurers buy data models like RMS, EqeCat and AIR which you feed in data about the risk you are considering insuring and it brings back what likely losses are in various time periods (eg 1 in 5 years, 1 in 50 years, 1 in 200 years). Some insurers take the numbers as provided, others may adjust based on their own experience of the accuracy of the model. 

The models these tools use are typically updated every few years and from personal experience it is often a big task to implement the changes because there can be very big swings in numbers between one version and the next which leads to difficult questions on if you really want to charge an extra £100k to a long standing customer who's been claim free for decades or if you really want to half your quote for a shopping centre you've always felt was too risky to take on. 

With flood in particular the coop's pricing will depend on who's on the AIS panel and if they do or dont subscribe to Flood Re. If their panel has changed and none are subscribers then you'd expect premiums to spike as you are substituting real risk pricing for the former fixed price flood cover. 

As an intermediary Coop/AIS may be equally blind to the pricing as you are, some insurers are fully open and give their intermediaries the rating logic and at the other extreme some simply have an API and all the broker gets is a single figure price in the same way you do when you go onto a website for a quote. 

Many thanks for the explanation, that's interesting to know. 

DullGreyGuy

Insurance pricing is a complex thing, in mass market consumer insurance its slightly easier because there is so much data that it gets closer to statistical rather than actuarial analysis but it adds other factors like propensity and elasticity modelling that are much smaller consideration in large risk placements. 

Add to that you have to consider the markets phase, how available capital is, what your reinsurance strategy is.

The person on the phone has no authority which is why, even if you are dealing with a direct insurer, they cannot explain why the price has moved other than in broad terms. Its a rabbit hole to nowhere if they are to start talking about the fact they've moved to v19 of RMS's UK Windstorm model which is moving it or that the XL Cat reinsurer has increased their pricing by 50bps or the cost of capital has spiked so they've taken on a proportional treaty but the ceding commission is lower than they'd expected. It would take a vast amount of training for your average 19 year old call centre agent to understand these concepts let alone explain it to the average customer in a way they'd understand and to what end? The price is what the price is, the insurer isnt going to commute a treaty and approach a new capital provider based on the conversation with a call centre agent and even were they to thats a month or two of work so not relevant for their renewal next week. 

rizblie

Between 2012 and last year I hadn't paid more than £300 for Home & Contents Insurance.  Cheapest I could fnd last year was an annual payment of £346 through the Co-Op.

So, a minor 15% increase on £300.     How on earth can you refer to that as daylight robbery?

How is 15% a minor increase? When inflation is in the region of 3%?  Have we now got so accustomed to these steep increases that we consider them minor?

The cumulative impact of significantly-above-inflation increases on car and home insurance premiums (which seems to have become the norm in recent years) is placing already-stretched household budgets under even more strain.

dunstonh

rizblie said:

Between 2012 and last year I hadn't paid more than £300 for Home & Contents Insurance.  Cheapest I could fnd last year was an annual payment of £346 through the Co-Op.

So, a minor 15% increase on £300.     How on earth can you refer to that as daylight robbery?

How is 15% a minor increase? When inflation is in the region of 3%?  Have we now got so accustomed to these steep increases that we consider them minor?

The cumulative impact of significantly-above-inflation increases on car and home insurance premiums (which seems to have become the norm in recent years) is placing already-stretched household budgets under even more strain.

What inflation rate is in the region of 3% that impacts on home insurance that way?
RPI is 4.1%.   However, every company or individual has a personal inflation rate based on their activities.  

Building cost inflation has been far higher than the headline rate for many years now.   Plus, the cost of claims is not just influenced by inflation but claims events.     Drought years create more movement and subsidence claims and wet years have more flood and subsidence claims.

Wood has been going up weekly with forward pricing near impossible to get.  Concrete is in a really short supply as HS2 has been sucking it up driving up costs for what is left.   You cannot get a builder for love or money.  And when you do, its not for love but for lots of money.

Staff costs have been increasingly rapidly (higher than inflation)
Energy costs at commercial level are still massively high.   

Companies are also stretched within their budgets.