Friday 21 May 2004, Staple Inn Hall

1. General Insurance Spring Seminar Friday 21 May 2004, Staple Inn Hall

2. Coping with Domestic Problems Household Help Spring Seminar 2004 Presented by Susan Ley and Graham Oswald With input from Uma Baska and Cheryl Russell

3. Household insurance – what it covers Detailed look into specific perils Benchmarks Current issues Audience participation What will this presentation cover?

4. The term ‘Property’ insurance refers to both commercial and domestic insurance. Household is domestic only. Household insurance provides coverage against loss to buildings and contents from certain perils and occupiers liability Coverage is to indemnify insured for the loss, subject to any limits or excesses Indemnity is either - Full Indemnity or New for Old Household insurance - what is it?

5. Perils - Fire

6. Perils - Theft

7. Perils – Weather (Flood)

8. Perils – Weather (Storm)

9. Perils - Subsidence Photo courtesy of Cunningham Lindsey

10. Perils – Escape of Water

11. Perils – Accidental Damage

12. Perils – Employer’s Liability

13. Perils – Public Liability

14. What trends do you think the claims cost will experience over the next 3 years, compared to the last 3 years, for the following perils? Worrying perils • Accidental damage • Escape water through Pitch Fibre pipes • Escape water excluding Pitch Fibre pipes • Floods • Subsidence • Fire • Public liability • Terrorism • Other

15. Worrying perils Survey Results - Prediction of perils which will display the most worrying trends over the next 3 years Least Worrying Terrorism Other Fire Accidental damage Escape of water through Pitch Fibre pipes Subsidence Escape of water excluding Pitch Fibre Pipes Public liability Floods Most Worrying

16. Perils - Subsidence Photo courtesy of Cunningham Lindsey

17. Perils - Subsidence • Movement of foundation due to changing ground conditions • Principal cause is soil shrinkage around property • Seasonal pattern • Reporting of claims tends to move with housing market • Average claim size is less than £6,000, but substantial repair work can top £30,000

18. Perils - Subsidence • ABI agreement • If claim within first 8 weeks with a new insurer, old insurer pays 100% of the claim • If claim after 8 weeks but within the first year with a new insurer, old insurer pays 50% and new insurer pays 50% • If claim after a year with a new insurer, the new insurer pays 100% of the claim

19. Perils - Subsidence • Heat wave – summer 2003 • Times article 11th August • Insurers are preparing for a fivefold increase in number of subsidence claims • How to fund increase in claims? • Insurance Times article 21st August • Leading loss adjuster “There will be a blip, but it will not be a huge event • This view is backed by the ABI

20. Perils - Subsidence Times article 8th April 2004 • Churchill reported a 300% year-on-year increase in subsidence claims last year, as did Direct Line. RSA also saw a 225% rise in claims. • Although many insurers say the increased cost of subsidence claims will not be passed to policyholders, insurance brokers expect an 8% rise in the cost of household insurance policies this year.

21. Perils - Flood

22. Perils – Weather: Floods • Flooding is a growing problem in the UK • ABI flood moratorium ended 31 Dec 02 • ABI issued a Statement of Principles on the provision of flood insurance. • Implementation dependent on various action from Government, with an annual review of progress.

23. Benchmark collection

24. Non subsidence claims - Paid development patterns Benchmark collection Source: PwC market data

25. Subsidence claims - Paid development patterns Benchmark collection Source: PwC market data

26. Non subsidence claims - Incurred development patterns Benchmark collection Source: PwC market data

27. Subsidence claims – Incurred development patterns Benchmark collection Source: PwC market data

28. Reinsurance Flood Inflation Current issues

29. This graph plots trends in the cost of catastrophe reinsurance cover for the UK property market over recent calendar years. 2003 purchasing patterns are used to calculate the price that would have been paid each year since 1992 for the same cover. The price was then indexed to 1992 values. Current issues - Reinsurance Source Benfield Greig

30. Norwich Union digital flood mapping Current issues - Flood

37. Trends in average cost by peril Source : Norwich Union – based on sub-sections of the household account

38. Current issues - Inflation Source: RICS / BCIS

39. The next few slides show some incidents. Which are generally covered by Householder’s Building and Contents policy? ? Household insurance coverage quiz

40. The owner’s dog escapes from the garden and causes a car accident ? What about if it is the owner’s horse ? ? First claim

41. The washing machine breaks down and floods the kitchen, ruining the floor ? ? Second claim

42. A visitor trips over and injures themselves in your house ? ? Third claim

43. You collide with a pedestrian while out riding your bicycle ? ? Fourth claim

44. You accidentally reverse your car into the house and damage the wall ? ? Fifth claim

45. You lose your wallet ? ? Sixth claim

46. Any Questions?