Flood plain dwellers suffer in competitive home insurance market

by Gill Montia

Story link: Flood plain dwellers suffer in competitive home insurance market

A survey of 200 insurance professionals has revealed that 90% expect insurance premiums in flood prone areas to increase substantially, unless the Government provides adequate spending on flood defences.

The research was carried out by Computer Sciences Corporation (CSC), the business and information technology firm, and warns that home insurance could become unaffordable for people living in areas at risk of flooding.

Across the UK around 2.2 million properties are located in flood-prone areas and following this summer’s flooding, which was the worst in the UK for 60 years, large numbers of home owners are facing increased premiums.

Competition in the home insurance sector remains strong and according to the CSC survey, 61% of insurance professionals expect the current practice of subsidising premiums for homes on flood plains to end completely.

Traditionally, cover for homes at high risk has been subsidised but there has been a growing trend for premiums to more accurately reflect risk.

Eighty-eight percent of respondents to the survey believe that insurers must start to price risk on the basis of detailed personal information, to compete on price.

Strong competition in the home insurance sector is expected to continue over the next five years, as price comparison websites allow consumers to make savings easily.

As a result, margins are under pressure and insurers will be forced to price more accurately for risk, to maintain market share and reasonable profitability.