“Forgive me for the amount of research that I’m about to reference, but there has been a rush of reports from a variety of organisations, all of which make very interesting reading for intermediaries.
“The fourth Money Supermarket Monitor on home insurance reported a surge in weather related claims in the winter of 2011. Storm damage accounted for 54% of buildings insurance claims compared with just 16% in the autumn, and total weather related claims were up 56% in comparison to those made in the winter months of 2010.
“The torrential rain and severe winds that swept across the UK last month led to the Environment Agency issuing almost 50 flood warnings and alerts across England and Wales. Insurers are still receiving claims as a result of the wide-scale flooding.
“It comes as no surprise therefore that business advisory firm Deloitte has warned that these most recent weather events could tip insurers into losses and force premiums higher for policyholders.
“Preparing your clients and prospects now for potential premium increases in the future, helping them assess the extent of cover they require and what they’re willing to pay is a wise move as a further piece of research demonstrates.
“Defaqto highlights the very real need for intermediaries to help guide their clients through the process of buying any form of insurance. The results of a survey released last month reported that 93% of people compared the features of different financial products however 47% admitted that they didn’t necessarily understand the product features and benefits.
“In its report the research company echoed a view that I have long held, that consumers need to take more notice of the huge variation between financial products rather than simply basing decisions on price.
“Price is clearly an important issue, particularly in the current economic climate. Some may be tempted to reduce cover while others may well decide not to insure their homes at all. MoneySupermarket.com reported last month that its research established that an estimated 3.5 million homeowners are missing out on some form of home insurance.
“Nearly 1.5 million admitted to having contents only while 1.3 million homeowners only have buildings insurance in place. Over 600,000 homeowners and a third of those who rent their homes admitted to having no form of household insurance at all.
“As I’ve pointed out in previous articles, unlike some other areas of insurance there is no real alternative to buildings and contents, bar personal savings. Based on Defaqto’s findings, I’d say that intermediaries have a really important job ahead of them in helping clients to source cover that meets their needs without breaking the bank.
“It’s essential to establish what cover your clients require. Those with mortgages have to have buildings cover at the very least, so help them make sure that they value their home based on the cost of rebuild and not market value – a hole that many of the less financially sophisticated consumers fall into, resulting in unnecessarily high payments.
“While it is ultimately their responsibility to get the sum insured right, you can help them by sourcing bedroom rated policies that provide cover up to a pre-determined limit, eliminating the need to calculate the cost of rebuilding the property.
“The age of a property is also a key consideration – another point that many consumers wouldn’t be aware of. New builds tend to attract lower premiums as they are covered by a ten-year National House Building Council warranty and as they should also have been built to new regulation standards, the rebuild cost is often less than for older properties.
“While some homeowners will be aware that a buildings policy will generally extend to include outbuildings such as garages and garden sheds, not all will cover boundary walls, fences, gates, paths and drives. Find out exactly what your client is looking to insure to make sure you can get them the cover they need.
“Turning to contents, this is not compulsory for homeowners or renters but how many could really afford to replace all their household goods and possessions should the worst happen?
“As with buildings insurance, it is their responsibility to get the sum insured right but few really have a handle on the true value of the contents of their home.
“Encourage them to be systematic and list down everything – many insurers provide online contents calculators that can be printed off enabling your clients to go home and check their inventory. And don’t forget to remind them to include items like tools and clothes.
“Some will want a policy with bells and whistles – for example including cover for business equipment as more and more people are working from home now.
“Others will want just core cover with perhaps the ability to add-on optional covers such as accidental damage – cover that is often assumed to be a standard inclusion but in reality is generally optional.
“Intermediaries should make sure that they are comfortable with what’s available on the market and look for providers that offer flexible cover options.
“As premiums look likely to rise, it’s going to be more important than ever to offer your clients real choice and depth of features and benefits from a range of blue-chip insurers so they can obtain the right level of quality cover at a price they can afford.”
