If we’re going to see more businesses invest in the bulk building of prefab or modular homes... we may well see insurers having to move their goalposts.
Mick Cairns is insurance director at Source Insurance
The shortage of housing in the UK, stricter lending criteria and the affordability of property are forcing those involved in the market as well as those wanting to get on the ladder to think differently, which have implications on the insurance cover required.
In an effort to help meet the government’s target of building around 200,000 homes a year, Legal & General recently announced that it is investing £55m in factories to create 3,000 pre-fabricated houses a year. The homes will include white goods and interiors and will be hugely energy efficient. Where these homes are going to be located isn’t specified and, as we all know, obtaining land and permission to build on it are major hurdles for any development.
The word ‘prefab’ when linked to houses brings up images of post-war dwellings. Well prefab homes have moved on since then and, somewhat ironically, German manufacturers such as Huf Hause have UK operations providing some of the most eco-friendly as well as stylish homes. However, regardless of their energy efficiency and whether Kevin McCloud from TV’s Grand Designs, would wax lyrical over their design, when it comes to insuring a prefab home most insurers would view it as being of non-standard construction.
If we’re going to see more businesses invest in the bulk building of prefab or modular homes to create a more affordable solution than someone lucky enough to be able to afford their own grand design, we may well see insurers having to move their goalposts when it comes to offering affordable coverage for the structure.
While it’s possible that these homes could prove part of the solution to the housing crisis, it seems that for many consumers buying an existing property in need of repair is the only way they can afford a home. A recent report by Confused claims that more than a third of homeowners have done so. It also found that nearly eight percent of people who bought a home in need of some renovation knew they could not afford to do the necessary work while one in ten said they lived in an unfinished property for a year or more.
This throws up another insurance issue as it is imperative that insurers know about all works being carried out, no matter their size or complexity, as most standard household policies will not cover any work other than decoration. They may well also impose restrictions on the works being planned. Specialist renovation cover is often required to provide the top-up the homeowner needs and is definitely required if a property is going to be empty either pending or during the work or if major structural changes are being made.
As the authorities and private sector come up with ways to try and build more homes, create new ways of building or bring old stock back into the market and as consumers try to help themselves in the meantime, the insurance industry is going to have to come up with the solutions to offer the protection the ultimate homeowner will need. This may well mean that insurers have to think outside the round hole they try and fit most people into but in the meantime, there are specialists out there that can help the square pegs obtain the right cover.
