Insurance costs to rise after €220m cold snap claims

HIKES in household premiums are on the cards after insurance companies paid out more than €220 million in claims related to last December’s cold snap.

Insurers dealt with almost 30,000 compensation claims for damages to homes and businesses caused by burst pipes during the freezing weather.

Household claims cost €173m, while commercial claims amounted to €50.6m, with Cork at €32.4m, the worst affected.

Chief executive of the Irish Insurance Federation (IIF), Mike Kemp, said household premiums increased by 10% last year and by the same rate in 2009. Asked if the signs were there that the increase could be in double digits, Mr Kemp was reluctant to indicate what the size of the increase was likely to be.

“I would certainly expect to see further increases. It will vary from company and company and I don’t know what the market average is going to be,” he said.

Mr Kemp said insurance companies were left with the option of either reducing their exposure in a continuing loss-making market or adjusting their rates to try and compensate for that.

He said the losses suffered by insurance companies was worse in household than in commercial property.

“The pressure on rates has not been as extreme in commercial property as it has been in household,” he pointed out.

The adverse weather conditions experienced across the country in December represented the third severe weather event during a 14-month period, according to the IIF. Mr Kemp said he remembered being shocked at the cost of compensation claims for the damage caused Hurricane Charley in 1986 — €50m, but it was dwarfed by the figures they were now considering, even allowing for the conversion rate and inflation.

Mr Kemp said the figures reflected how the southwest was particularly badly affected by the weather, as was the west and parts of Connacht and Ulster.

Asked if the areas worst affected by the weather could expect higher premiums as a result, Mr Kemp said the weather was just one peril of a dozen or so insured under a policy.

“It will contribute to the overall impact but would not be decisive on its own,” he said.

And, he said, it would not follow automatically that those who made a single weather related claim would see a change in terms or a refusal to cover. “With a freeze there was a limited amount you can do if a temperature suddenly dives and that it is taken into account,” he said.

“With flooding it is more to do with local conditions, topography of the land and so on. There is perhaps more you can do, or that the public authorities can do, in terms of flood defences,” he said.

Mr Kemp also said there were indications that people were not continuing to insure their properties or had revised downwards the amount they were insuring for.

He pointed out that there had been an increase or about 3% in property insurance last year. “If everybody was continuing to ensure for the same values, you would expect to see a greater growth in premiums.”