Modern Insurance Magazine Issue 60

FEATURES
A New Climate
For Claims
The changing global
climate is having a
substantial and
increasing impact on the
insurance industry, with
storms, droughts and
wildfires more frequent
and severe than ever.
The problem for insurers is knowing what
to expect. What they knew in 1990 and
even 2010 is not necessarily relevant now,
and what they learn now is unlikely to
help them forecast for 2030 and beyond.
In the US, the number of natural disasters
has doubled in the last 20 years, while in
the UK storms and flooding have become
a regular and costly event. In February
2022, three storms buffeted the UK in
quick succession – Dudley, Eunice and
Franklin – with the claims cost to insurers
estimated to be about £500m.
According to the Met Office, extreme
weather like this is only going to become
more frequent and severe. Its data has
revealed that UK summers from 2009-18
were 13% wetter than 1961-90, and they
are now predicting that extreme rainfall
events in the UK could be four times as
frequent in 2080 as they were in 1980.
Risk
For the insurance industry, this poses
both a direct and indirect risk. Alongside
the obvious and immediate damage
caused by such weather, insurers must
also consider the cost of more insidious
effects in areas of the sector such as
subsidence. Evidence of this is already
starting to take effect, with subsidence
surges in 2018 and 2022 both coming
after unusually warm winters and wet
summers.
Speaking at this year’s ILC Subsidence
Claims specialist event, Sarah Dodd,
Director of the Subsidence Forum
and Treelaw, noted that ‘subsidence is
inextricably linked to climate change’.
With Consumer Duty just around the
corner, handling these claims quickly and
fairly has never been more important.
However, this is easier said than done,
with a lack of skills, erratic volumes
and growing challenges around taking
mitigating measures making effective
claims handling ever-more difficult.
Steve Gelder, CEO, Gelder Group,
who was also talking at the specialist
event, said ‘a subsidence claim is
the worst claim in the world to have
for homeowners. They are virtually
paralysed for two years. They can’t sell
the house, they can’t change insurers,
they can’t do anything. Previously, an
engineer would visit the site and decide
what needed to be done. But now
there are so many people involved, and
everything takes so much longer’.
Skills
The skills issue is widely reported. All
industries find themselves in a battle
for fresh talent, exacerbated by the
pandemic. There are now more than a
million vacancies in the UK, meaning
insurers have to compete with other
sectors for the best people.
Nick Hill, Head of Home Claims, Aviva,
acknowledges that ‘there is enough
expertise in the sector to handle
subsidence claims now, but projecting
forward, we need to make sure that
expertise remains there and improves,
adopting new and innovative methods.
We need to guarantee a continued
pipeline of people and skills’.
Insurers can’t afford to simply recruit en
masse when surges strike. While the vast
majority of subsidence claims are simple,
about 10% are complex and require
expert knowledge to first identify and
then process the claim correctly.
Alex Finch, Commercial Director, Optera
Structural Solutions, said ‘you have
to secure the technical people within
your business, and then ringfence them
around technical claims. The people still
training and developing can then handle
the simple claims’.
Partners
Partnering with experts in the supply
chain at an early stage is one way to
ensure correct handling of complex
claims, while innovative technologies
are also assisting insurers as they work
their way through sudden increases in
volumes.
Automation and live video are becoming
commonplace, and the challenge now is
to find digital-savvy people who are able
to make the most of these solutions.
Kevin Williams, Head of Subsidence &
Valuations, Sedgwick, said ‘the surges
of 2018 and 2022 are very similar, but in
2022 there was much more use of digital
solutions. That will increase again when
we get another surge, and as an industry,
we need to ensure that we have those
skills available to us. You have to recruit
and train new talent’.
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