By Caroline Elliott-Grey product manager, U.K. and Ireland, for LexisNexis Risk Solutions, Insurance
27 percent rise in subsidence risk
The analysis shows those at most increased risk are in the Oxford and Cambridge arc, where significant housing development is expected over the next 30 years. 1.2 million homes is a 27 percent rise on the 4.5 million households already at subsidence risk today.
Moreover, in places like Milton Keynes, currently at low risk, an additional 18% of households will be at risk of subsidence by 2050. Swindon, meanwhile, will see the percentage of possible or probable ‘at risk’ households increase from 20,000 properties today to 64,000 in 2050, a 219 percent increase.
Areas that are currently at risk will also see increases in the severity of subsidence. For example, Oxford is expected to see an additional 33 percent of households where subsidence is deemed probable (vs possible).
These subsidence projections also pose a serious risk for the estimated 7 million residential properties currently without home insurance, many of which are likely to be homes to people in lower income groups. This underlines the pressure on the insurance sector to make insurance affordable in the face of increasing environmental risks.
Insurance providers were expected to pay out £219 million in subsidence claims in 2022 and with more homes being built in the UK, the losses from claims payouts by 2050, only 26 years from now, could be significant.
While there is little the insurance sector can do in isolation to change the weather, it can play a vital role in raising awareness amongst homeowners and insurance providers of the massive challenge of addressing subsidence in the UK in the coming years.
Data provides hope on the horizon
Knowing exactly where subsidence risk is present at the point of quote is clearly essential. By using geospatial data intelligence insurance professionals can make a full, fast and accurate assessment of environmental risk at individual property level to offer the fairest and most precise price for that home.
Data on the average or expected weather conditions, together with soil type, the pattern of clay rich soils, the proximity of large trees and types of ground movement, enable a risk score to be created which can be used in insurance pricing, providing an indication of a property’s propensity to subsidence.
Accessing this score from one source alongside property characteristics data such as the value, age and construction of the property, the number of bedrooms, bathrooms, roof type etc., enhances the ability to provide a quote that reflects that applicant or customer’s home, not their next-door neighbour’s property or the homes in the next street. This insight would also enable them to support the customer in keeping a watch on the risk of subsidence so that any remedial action can be taken at the earliest opportunity.
A picture can paint a thousand words
Geospatial data visualisation through solutions such as LexisNexis® Map View can also play a vital role in helping insurance providers manage their books of business. Geospatial data visualisation provides an easy way for insurance providers to aggregate data from multiple sources to gain both an accumulated and granular view of a property’s subsidence risk or the risk for a whole area. By intelligently mapping where subsidence risk is present and overlaying this with customer data they can immediately see their exposures and accumulations to support risk selection and pricing.
It’s not just perils and property characteristics data that can help identify subsidence risk, a detailed history of subsidence claims for a property including the cost, the circumstances and any remedial work undertaken will soon become available through the first cross-market contributory claims database - LexisNexis® Precision Claims. This will enable contributing insurance providers real-time access to granular data on both the home and motor claims data a person, and the asset to support pricing and underwriting decisions.
A detailed view of subsidence claims history
The insights to be gleaned from the market sharing their home claims data will be invaluable to insurance providers at the point of quote. Not only can it uncover past claims for subsidence that may have occurred before the customer’s tenure, but it will help insurance providers see if a property has a risk of subsidence but has had no claims related to that risk, meaning the ability to underwrite and quote on this basis is much improved. In time, the solution should also reveal a deeper understanding of the risk and potential cost of a subsidence claim based on the claims experience in the market for that locality.
The average subsidence claim incurred in 2022 was £9,600. As premiums rise due to factors outside of the market’s control, insurance providers need to do all they can to help ensure insurance remains affordable. Educating homeowners on the signs of subsidence is vital so that remedial action can be taken if necessary at the earliest stage when the work is less likely to be invasive and expensive. At the same time, insurance providers can leverage the power of data to provide customers with appropriate subsidence cover for the risk of their property and an accurate and fair premium.
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