With policy renewal season just round the corner, we thought a reminder of the factors that influence your insurance premiums may be a good idea.
With a squeeze on budgets and the need to keep service charges to a minimum for struggling residents, property managers may well be considering their options for reducing this large expense.
Read on to find out how you can make sure you’re not paying over the odds, without underinsuring the building and putting anyone at risk.
Reasons for Recent Increases
It’s no secret that insurance costs have been increasing throughout the year.
This is due to a few factors; one is the soaring cost of rebuilding and repairs, the other is a huge increase in the amount of claims being made, as well as the increasing value of those claims. The third is the cost to insurers for their own reinsurance.
The supply chain issues that began in 2021 are still ongoing. Due to the pandemic, Brexit and the war in Ukraine and now the inflation issues we’re all facing, materials and labour costs have increased dramatically.
Insurers must base their premiums on calculations of the costs that they will need to cover in the event of a claim. For this, they refer to the Building Costs Information Service, supplied by RICS, which confirms the Building Declared Value (BDV). This is the cost that would be incurred to completely rebuild the property to is current state including fitted kitchens and bathrooms etc, it’s not based on the value of the land or desirability of the building. Insurers can’t simply charge higher premiums to maximise profit. Their fees will always be based on the BDV; a figure that is out of their control.
The increase in claims and the higher value of those claims means we are currently in a ‘hard market’.
This reduces insurers’ willingness to take on risks. Some won’t insure blocks at all because of this, others operate on a case-by-case basis.
Companies are also facing higher costs for reinsurance (the cover insurance companies take out to cover themselves against major losses that may affect their ability to pay out for valid claims). This has been a general increase across the market due to significant international events; most notably, the Covid pandemic, but also due to large-scale fires and storms.
Storm and flood frequency and severity have increased both nationally and internationally- resulting in insurance companies paying out far more in claims than they have in previous years. This has forced many companies to increase their premiums to remain solvent.
Steps You Can Take
The first stop is obvious; shop around. Utilise a trusted broker to do this on your behalf to reduce the stress and chances of over or under insuring your building. Make sure the value of your property is up to date and check your policy wording to be sure you’re only paying for the cover you need.
Your management of risk and your number of claims are huge factors in your premium costs. If you can show insurers that you’re putting assessment recommendations in place and abiding by maintenance programmes to reduce the risk of water damage etc then they will be far more likely to work with you, and for a decent price.
You can also consider increasing your excesses on your policy. This needs to be openly discussed with residents as, with an increased excess, the cost of smaller repairs and making good will likely come out of the service charge budget to avoid paying a large excess/making a claim.
Top Tips for Keeping Premiums to a Minimum
One: If you’ve had a claim, provide your insurer with evidence of the measures you’ve taken since to minimise the risk of the same issue occurring again
Two: If you’ve had a Rebuilding Cost Assessment, let your insurer/broker know and provide the report
Three: If you’ve had a Fire Risk or Health and Safety risk assessment completed, let your insurer/broker know and provide the reports alongside any evidence of measures taken on the back of the assessor’s advice.
Four: Let your insurer/broker know if you have any additional features in place to reduce risk in your block such as an automatic fire alarm, CCTV, sprinklers or a door entry system
All of the above can lead to your insurer to provide a discount on your premium, and every little helps these days.
For more information from Flat Living Insurance, please click here. For more information from Flat Living, then alternatively click here.
