The property insurance sector has seen record claims payouts this year, with insurers paying out a total of £4.1 billion in the first nine months of 2024, according to the latest data from the Association of British Insurers (ABI). A news release noted that this figure represents the highest amount ever paid out during the first three quarters of any year.
In the third quarter alone, insurers paid £1.3 billion in claims, assisting homeowners and businesses in the wake of unexpected events such as fires, flooding, and other weather-related damages. This follows a similarly costly second quarter in which £1.4 billion was paid out. When compared to the same period last year, the total claims for 2024 are £500 million (15%) higher.
The increase in claims was largely attributed to extreme weather events, which continue to drive up home insurance claims. Storms, heavy rain, and frozen pipes led to £136 million in damage during the third quarter, a 6% increase from the £128 million in claims paid out in Q3 2023. Weather-related claims for businesses also remained elevated, reaching £90 million in Q3 2024, a 28% increase from the same period last year.
A rise was also noted in subsidence claims, which saw an 11% increase from the previous quarter, reaching £66 million. This marks a 61% rise compared to Q3 2023, as properties continue to experience shifting ground conditions linked to extreme weather, noted the report.
As the claims pile up, homeowners are feeling the impact on their insurance premiums. The average cost for a combined buildings and contents policy rose to £407 in Q3 2024, a 3% increase from the previous quarter and 16% higher than the same period in 2023. Other policy types, including buildings-only and contents-only insurance, also saw price hikes.
The rising costs have been compounded by inflation, which has driven both premiums and claims to historic levels. When adjusted for inflation, the average premium for property insurance is now at levels similar to 2017, while the equivalent average claim is 72% higher than it was in 2017.
Experts warned that the trend of insurers paying out more in claims than they receive in premiums is expected to continue. EY figures revealed that, in 2023, for every £1 received in premiums, insurers paid out £1.18 in claims. This follows a similar pattern in 2022, with the expectation of further losses in 2024. This would mark the fifth consecutive year of losses for the property insurance sector.
Louise Clark, policy adviser at the ABI, emphasised that insurers are playing a critical role in helping communities recover from extreme weather events. “Insurers continue to be at the forefront of climate change, supporting communities impacted by extreme weather to recover as quickly as possible,” she said. However, she added that insurers cannot address these challenges alone. Clark called for urgent government action.
“We also need to see swift action on surface water flooding, and an immediate end to building on land that is at a high risk of flooding. Flood prevention and resilience measures must be considered in all planning decisions and building standards – to make sure all new buildings are climate resilient,” she noted.
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