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Property Owners’​ and Landlord Insurance

From multi-million-pound portfolios to single properties rented out, it is important to make sure your investment is properly protected in the event of a claim.

Often it is very tempting to take up a mortgage provider on their offer of providing cover but these policies rarely give value for money. Alternatively, it can be tempting to look on a comparison website to get a quick policy so that the solicitors can tick that box – again, if you don’t understand the cover you are purchasing it can make a claim a much more memorable experience for all the wrong reasons.

Property Owners’ insurance is one of the most competitive lines of business and as a result if you haven’t in the last few years it is definitely worthwhile shopping around to see what is available to you.

A Property Owners’ policy will include cover for the building itself, and in addition can cover landlord’s contents, potential legal expenses, and any loss of rent you suffer as the result of a claim on the property element of the policy.

Not all policies are the same and it is vital to check a policy’s exclusions carefully.

One of the most important areas that should be checked before taking out a policy is the unoccupancy conditions on the policy. A lot of insurers will restrict cover from an “all risks” basis to Fire, Lightning, Explosion, Aircraft (“FLEA”) only as soon as a property becomes untenanted. This literally means they will only pay out a claim that occurs as a result of one of these four perils.

Unless you are certain the property will not become unoccupied over the course of the year this would leave you exposed in the event of a common loss such as storm damage or flood whilst in between tenants. Clearly finding cover that has more flexibility than this is vital to protect your properties. We have access to several insurers that give full cover whilst a property is unoccupied and we regularly enhance a customer’s cover without increasing their premiums.

Another common exclusion from basic property owners’ policies is the illegal cultivation of drugs by a tenant. This is pexels-photo-930434frighteningly common in residential let properties; however, it is not exclusive to them and I have handled a claim in excess of £40,000 in the recent past for a warehouse that was converted into a cannabis farm by a tenant. Luckily for our client in this scenario they were covered on a policy which did not exclude the peril, otherwise they would have had a very unfortunate and very high bill to put right all of the damage caused to the building by the tenant’s “adaptations”.

Fires are extremely common where tenants have set up cannabis-farming operations due to the number of heaters used, the strain placed on the electrical system without adequate precaution, and the target placed on the property by local “competition”. Despite this people still often see it as an easy way to make money and we continue to see it happen. All that we can do is continue make sure our customers are insured in the event this happens to them, and recommend on risk management measures, for example three- or six-monthly inspections of residential let properties.

If you have a large portfolio of properties then it could be that you actually lose track of them all and could at some point realise you have forgotten to notify your insurer of a new house. Fortunately for you it is also entirely possible to have an extension on your policy for new purchases that have inadvertently not been notified – if this is of interest make sure that you review any quotes before agreeing to go ahead with the cheapest option.

We have access to a large number of insurers who can offer a bespoke policy to fit your requirements – and it can be done without paying over the odds.

If you would like assistance reviewing your current policy feel free to get in touch.

The PI Insurance Market

You may have heard this from your broker already, but the Professional Indemnity insurance market is hardening. Some underwriters are looking to charge higher premiums for lower levels of cover, and those that aren’t are pulling out of the PI market altogether.

There are a few reasons for this, probably the major factor being 15 years of under-performance from underwriters’ perspectives and this has been backed up by a Lloyd’s of London market review which revealed that 62% of syndicates underwriting PI business were losing money on their PI books.

However, in 2017 there were a number of more immediate triggers that sparked the change in underwriters’ attitudes, including the Grenfell Tower tragedy (bringing construction techniques into stark focus), the under-performance of waste-to-energy projects and technology, and an unusually high level of natural disasters across the globe including hurricanes and forest fires (which may not have been PI losses, but depleted cash reserves of insurers sharply).

Whereas previously an insurer may have underwritten a risk to maintain their market share, they are now looking to decline any risk which falls outside of their underwriting appetite.

This means a few things for you. It is very likely that you will see an increase in your premiums in the near future if you haven’t already. To mitigate this as far as possible it will be crucial to tackle those PI proposal forms earlier than usual. Because of the premium increases across the board more brokers are marketing their risks and as a result underwriters’ workloads are piling up, meaning it is taking longer to get quotes back from them. pexels-photo-834892

It is also important to consider that the good underwriters are more selective in the risks they accept, which means they might be able to keep a premium competitive and cover wide but they are probably going to come back and ask for more information before they can offer it. The earlier the process is started the more chance you have of getting the right underwriter to be able to fully consider your risk.

When your renewal is presented make sure you consider that insurers are introducing additional exclusions to their policies which should be made very clear to you by your broker.

Another thing it will be important to do is review your current policy limits and excesses, and keep an eye out for insurers moving away from a limit for “each and every claim” to a limit “in the aggregate” for the year, which potentially can mean in the event of a catastrophic loss your PI insurance cover is exhausted until the next renewal. This is certainly another area we would expect your broker to discuss with you when obtaining renewal terms.

There are certain things you can do to reduce your risk to an underwriter, for example active supply chain management. Ensuring that all companies within your supply chain and all sub-contractors maintain their own PI insurance to the same limit as you will make it easier for an underwriter to look at your risk favourably and can help reduce premiums. In fact, some underwriters insist on this as a policy condition.

Hopefully this guide will offer a little insight into PI insurance from the other side of the curtain to help you when reviewing your own cover, but if you would like any more information feel free to get in touch, we will be more than happy to help.

Whiplash Reform – the Civil Liability Act

The Civil Liability Act reforms, which will come into effect in April 2020, aim to tackle the endemic whiplash culture in the UK and in turn reduce the cost of motor insurance for everyone.

Specifically, the reforms will act by both reducing the compensation paid out for whiplash injuries and also reducing the amount to be paid in claimant legal fees.

Whiplash claims currently cost insurance companies £2bn a year and this is estimated to add £90 a year to the average motor insurance premium.

For any whiplash injury affecting the claimant for less than two years a tariff system will be used to give a prescribed value to the injury. At present for whiplash affecting a claimant for six months an insurer could expect to pay them around £2,000 plus full costs, however under the new tariff system the amount would be £450 plus reduced costs.background-british-budget-business-41206

With regard to legal costs the amount that claimants will be able to recover from the defendant (and their insurers) is substantially reduced. At present the “small claims track” applies for claims up to £1,000 in value and under this protocol a claimant can recover only £80 in legal costs. The limit for the “small claims track” is being increased to £5,000, meaning that most whiplash claims will now fall under the scope of this procedure. For comparison, at present for any claim worth between £1,000 and £10,000 a claimant can recover £1,300 in costs.

As with any new personal injury law many challenges to the new system are to be expected and in order to feel the full benefit of the reforms it will be vital to ensure your insurance broker fully understands them and can keep you well informed of the handling of any claims against you.

If you would like any further information on the Civil Liability Act or how we control customer claims please feel free to get in contact.

 

© 2019 Hoyland Insurance Brokers Ltd.
Authorised and regulated by the Financial Conduct Authority
Company Registration Number: 1404770
FCA Firm Reference Number: 301204