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How will Coronavirus Affect my Home Insurance?
Last modified:We take a look at likely the impact of COVID-19 to the UK home insurance market and ask if premiums are set to rise?
Storms Ciara and Dennis ripped through the UK in February 2020, bringing severe flooding and damage to homes across the country. UK home insurance providers were dealing with an unprecedented level of claims resulting from storm damage even before the horror of Coronavirus brought the UK to a standstill.
FCA Stresses the need for Home Insurers to be Reasonable
The UK insurance landscape is being changed dramatically as the social and economic effects of social distancing ripple across the country. Seeing this coming, the Financial Conduct Authority (FCA) has already issued advice to insurers, urging them to be fair during these unprecedented times and to consider payments on claims they might usually have rejected.
Why Change of Use is so Important
For many of us our daily lives and habits have been changed considerably since the Coronavirus outbreak and this could potentially have an impact on future insurance claims. Before Coronavirus, it was standard practice for home insurers to reject claims on the grounds of non-disclosure. For example, failure to inform your insurer of a change of use, such as working from home or operating a business from home, could have voided your policy because the change of use adjusted the risk on which your premium had originally been calculated. However, with so many people now unexpectedly working from home, insurers are being requested to treat such circumstances leniently with respect to claims.
Claims for accidental damage may well increase as millions of people are now confined indoors with kids!
Reasons Why Home Insurance Premiums May Rise
UK sales of home contents and buildings policies could fall, as owners consider losses due to theft, fire, and escape of water to be greatly reduced if they are always at home. This is just one way in which the home insurance sector could be impacted, others may include:
Insurers raising premiums in response to the dramatic increase in claims since the start of the year.
Decreased competition caused by insurers temporarily ceasing or reducing trading, might lead to higher prices.
Negative press and lack of confidence in the insurance sector could lead to a reduction in policy sales.
People prioritising spending could point to a drop in sales of non-essential policies.
The Impact of COVID-19 on Home Insurers
In such rapidly changing times, the true impact of Coronavirus on the home insurance industry is little more than conjecture. However, whilst the prognosis for the insurance sector is turbulent, historically insurers are not hit as hard as their counterparts in the financial sector. Indeed, there are insurance companies that have been trading for more than 100 years, able to persistently weather and adapt to the changes the world throws at them. Short term however, it is realistic to expect a sharp rise in premiums as insurers struggle to cope with unprecedented circumstances.
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