Insurance Risk: Will climate change affect your premiums?

Will climate change affect your insurance premiums?

The UK is a rather wet place – we’re betting that you’ve noticed that – and British homeowners are used to dealing with things like condensation, damp, and leaky roofs. That said, this summer was one of the hottest on record – hitting a peak of 40 degrees. Experts warn that climate change won’t only affect our summers, but our winters could also be harsher and wetter.

So as the climate changes, so must our approach to all things property. These changes aren’t new, but they’re getting harder to ignore – and we ignore them at our peril! 

Buying a property is one of the biggest financial steps most people will ever take, and for landlords it’s an investment, meaning it needs to work over the long term. So being aware of how extreme weather might hit your area and what to do about it is essential – not just the picture today, but over the next few decades. 

How can extreme heat affect your property?

The UK is known to be a country that is more prone to cold and damp than blistering sunshine, but that seems to be changing. But can prolonged hot dry weather really affect your property?

  • Subsidence. Subsidence is caused by the ground under your property sinking, unbalancing the foundations of your house. Telltale signs of subsidence are cracks in the walls. Subsidence can become an issue after long periods of very hot, dry weather, meaning the ground contracts, so buildings can start to move
  • Roof damage. Increased heat and humidity can cause a buildup of moisture in your loft, which can deteriorate your roof
  • Burst pipes. It’s not just frozen pipes that can be a problem, you’re likely to use more water in very hot weather, so you want to make sure that the sealing or caulking on your pipes is in good condition or you could see a leak! 
  • Increased fire risk. There were fires caused by the heat across the UK – a simple grass fire in your garden could lead to damage to your property

While there’s no current indication that insurers plan to adjust policies to reflect the potential increased risk posed by climate change, we always recommend that you know your buildings insurance policy inside and out. Making sure you provide the accurate information to your broker or your insurer means that your policy is not going to be invalidated by a minor error.

Should you worry about increased flood risk?

Despite the rising temperatures, our already-wet country could get wetter!

In 2020, the Met Office compared the weather of 2010-2019 with that of 1961-1990 and found that today’s UK summers were 13% wetter, and winters were 12% wetter. The Met Office started recording the wetness of a year 160 years ago, and, rather alarmingly, 7 of the 11 wettest winters have taken place in just the past 25 years. 

In 2019 the UK Climate Change Committee put out a grave warning: 1.4 million people in England face a risk of 1:75 or greater of flooding of any kind (including coastal), they said. What this means is that those people have a 1.33% chance of flooding in any given year. 

Perhaps this doesn’t sound like much, but the current associated damages to homes cost £270 million annually, and this figure will rise sharply if global warming reaches 2˚C above the pre-industrial temperature.

In November 2019, Doncaster experienced its wettest November on record and over 760 households and businesses were flooded. Some of those affected were unable to claim on their insurance, so an independent review was launched into how to improve people’s awareness of their insurance options in areas at risk of flooding. This investigation also sought to help ensure tenants, landlords and property owners have better access to flood insurance.

Do some parts of the UK have it worse than others?

When it comes to flooding, coastal cities are most at risk.

Brighton is one of the most at-risk cities in the UK, thanks to its coastal location delivering a double whammy of rainfall and coastal flooding concerns. Cardiff and Belfast are also up there, with both cities predicted to be partly underwater by 2100. 

Exeter and Liverpool also scored highly on the risk scale because of their coastal location, although they’re expected to see in 2100 above water. Overall, the picture is worse in the south.

Is my property safe from flooding?

The UK government’s online tools allow you to check the flood risk for any area in the UK, so you can see how things are in your neck of the woods, including a map showing local flood risk zones, risk levels for coastal/rainfall risks, and other details such as which authority manages flood risk for you, so it’s worth checking those when you’re thinking about putting in an offer on a property.

Of course, it comes down to more than living in a certain town though, and property type, garden landscaping, absorbency of nearby ground materials, local flood management techniques all play a part. That’s why at Mashroom we want to help you understand the risks to your property and how best to guard against them – read on for how. 

If my property’s in a high-risk flood area, what does this mean for me?

The main consideration is how flood risk affects mortgages and insurance

Mortgage lenders weigh up whether to lend buyers money based on whether it’s a solid investment for the lender. In turn, this means they’ll be wary of investing in something where the value may drop due to flood damage. 

The result is they’ll be looking for higher deposits and lower loan-to-value ratios. Likewise, insurers will raise their premiums on properties in a high-risk area – or may refuse cover altogether. Combined with the pressures of the cost-of-living crisis and inflation, the action plan of any landlord needs to be considered carefully. 

When it comes to flooding, what responsibilities do I have as a landlord?

Quite a few! 

While the world of landlord responsibility has a lot of ins and outs, the nutshell version of this is that if tenants didn’t cause the issue, it’s down to the landlord to fix it. So, if flash flooding causes flooding to your property, you have to put everything right – from the structure of the building right through to finding somewhere for your tenants to stay until the property is habitable again. 

Making sure your cover is thorough and will cover both the fix and the additional accommodation is key to protecting your pocket. Sure, you can shop around online for the best deal, but we recommend speaking to a broker who not only has access to more deals, but also has the knowledge to help you find the right cover for you. 

We’ve also got a great webinar on insurance risk and how to avoid overpaying, should you want to learn more.

Sources for this article include: Met Office, LSE, Reuters, Climate Change Committee

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Mashroom is an appointed representative of Adelphi Insurance Brokers Ltd. Adelphi Insurance Brokers Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Their Financial Services Register number is 594620, with permitted business activities being introducing, advising, arranging, dealing as agent, assisting in the administration and performance of general insurance contracts and credit broking in relation to insurance instalment facilities. You may check this on the Financial Services Register by visiting the FCA’s website, or by contacting the FCA on 0800 111 6768