Rain, storms and floods: UK insurers rocked by record £1.4bn property claim surge

British insurers have been rocked by an eye-watering £1.4bn in property claims for the second quarter 2024, smashing records as the biggest quarterly payout ever logged.

In addition, the average payout per home insurance claim also saw a significant rise, increasing by 16 per cent to £5,284, revealed by the Association of British Insurers (ABI).

The rise in claims has been largely attributed to adverse weather, which continues to play a significant role in home insurance claims.

In early January, Storm Henk resulted in severe weather warnings and floods in the Midlands, while in April, flooding was widespread in the aftermath of Storm Kathleen and Storm Pierrick.

Damage to homes from storms, heavy rain, and frozen pipes resulted in claims totalling £144m in the second quarter, marking the fifth consecutive quarter where weather-related claims have exceeded £100m.

Businesses hit too

While weather-related damage was not limited to homes, as businesses also faced substantial impacts, with claims reaching £81m.

Subsidence claims also saw a notable increase, with payouts reaching a record £60 million in Q2, up 12% from £53 million in Q1 2024.

The increasing claims and associated costs have also impacted insurance premiums. The average price of home insurance rose to £396 in the second quarter, a six per cent increase from the previous quarter.

Building-only policies saw a seven per cent rise, with the average price reaching £321, while contents-only cover increased by four per cent, with an average price of £137.

Over the longer term, the average premium for a combined policy has risen by 19 per cent compared to the same period in 2023. However, when adjusted for inflation, premiums remain 2.5 per cent cheaper than in 2017, although the average claim paid is now 45 per cent more expensive than in the second quarter 2017.

Insurers under pressure

The increase in claims is putting pressure on the insurers, as EY figures show that in 2022, for every £1 received in home insurance premiums, £1.22 was paid out in claims and expenses.

EY anticipates further losses in 2023 and 2024, marking the fourth consecutive year that property insurers will pay out more in claims than they receive in premiums.

While Flood Re, the joint initiative launched in 2016 between the UK government and the insurance industry in response to the increasing number of homes at risk of flooding and the rising costs of flood insurance.

It reported last month that third of all claims since Flood Re’s inception were received in 2023/24, in the wake of the winter storms Babet, Ciaran and Henk.

Louise Clark, policy adviser at the ABI, emphasised the critical role of home insurance in supporting customers during challenging times, despite rising cost pressures.

She called for urgent government action to reform the planning system and enhance resilience measures to reduce the nation’s vulnerability to climate change.

“Urgent government action to tackle surface water flooding and maintain flood investments and maintenance will also help reduce the future impact of flooding,” she added.