The last decade or so have not been a particularly good one for the UK insurance industry. It seems that at least once a year the UK insurance industry gets to feel the bit of a natural disaster somewhere in the world.
In more case than not, environmentalist will then go on record as saying the natural disaster was avoidable, but for the fact that we are subject to ongoing global warming, which we should only expect to get worse. And, the simple fact is that this trend of global climate change may severely affect your insurance premium.
For the 5 year period from 1998 to 2003 (the last on public record), weather-related insurance claims in the UK amounted to £6 billion. This figure is almost double that paid out during the 5 period immediately prior to this. In this regard, it doesn't take long to realise that UK insurance companies set their premiums based on what they calculate the chances are of them having to pay-out under the insurance policy are.
So, if the chances of having to pay out on an insurance policy for weather-related damages have risen twice in the last 5 years, then it wouldn’t be unfair to assume that weather-related claims could double again in the next 5 years. On this basis, the amount of premium you paid 5 years ago will have quadrupled in 5 years time! However, with industry experts suggesting that future weather related insurance claims could leave many UK insurance companies in financial difficulties, you may well find that loss adjustors determine that the risk has increased significantly more than this, and set a premium suitably high to reflect this point.
Unfortunately, the only way that you can reduce your insurance premiums is to give the UK insurance company reason enough for them to believe that it is unlikely (or less likely) that you’ll make a claim against the insurance company. Nonetheless, when it comes to house insurance, you can hardly reduce the chance that a natural disaster won’t happen – because that’s out of your hands. As such, as the policyholder you need to consider alternative ways if you want to make sure that your insurance premiums do not rise dramatically.
The only real alternative that is left to policyholders is to increase the minimum payout claim threshold. By the minimum payment payout threshold, what is meant is that you agree not to claim on the insurance unless a minimum amount of damage has been done to your property by the weather. By increasing this sum, you may be able to hold-off on the prospect of having dramatic increases in your annual home insurance policy.
The only other alternative left open to you is to picket you government and ask them to take the issue of global warming seriously. If that were to happen, and there was to be less chance of the natural disaster happening, then this would reduce the level of risk of the insurance company having to pay-out under the policy and this reduction of risk should be reflected in a reduction in your insurance premiums.
Written By: Joseph Kenny
