Householders face double-digit insurance hikes

DOUBLE-DIGIT increases in home insurance could result in householders being unable to afford adequate cover, with catastrophic results, according to the Consumers’ Association of Ireland.

The warning comes in the wake of the announcement by insurance companies that another major hike in premiums is on the way, as a result of recent severe floods and freezing conditions.

The CAI’s chief executive Dermott Jewell said insurance firms had to recognise that customers were already paying more than ever in premiums.

“They have already increased premiums across the board over the last 18 months, and it has to be borne in mind by the industry that any double-digit increase has the potential to drive consumers away from insuring their property.

“The industry needs to keep in mind to see what further injections they can make through cost-cutting exercises, especially in marketing, to ease price hikes,” he said.

Insurance sources attributed the recent rises in premiums to a €174 million loss suffered across the property insurance market in 2008, coupled with the high costs of last November’s flooding. The next wave of rises will stem from the big freeze claims, which are just kicking in.

Most freeze claims were for damage to homes after pipes burst while two-thirds of the flood claims were for damage to commercial premises. A further €8 million was also paid out for motor claims following the floods.

Cork was the worst affected by floods with 1,164 household claims and 649 commercial claims, both costing over €140m.

“Events that were once every 10 or 20 years are now happening once every two or three years,” said one insurance executive.

“Prices have to reflect that. Prices were at record lows, now they have to go up,” he added.

However, this flies in the face of the advice given in a presentation to the Insurance institute of Ireland by David Crichton, visiting Professor at Benfield Hazard Research Centre at University College London.

Pointing to the tendency of insurers to take a reactive, short-term view towards increased flooding by either hiking premiums or refusing cover, he suggested instead an ongoing dialogue between insurers and local authorities to manage risk better.

“Withdrawing cover is a last resort,” he said.

In the meantime, the EU Flood Directive will require member states to prevent and limit floods and flood damage by identifying river basins and coastal areas at risk and creating flood risk management plans. The first assessment is to be completed by 2012.

The directive was prompted by concerns over cross-boundary flooding in Europe where the actions of one country could increase the flood risks in another country.

New guidelines recently introduced by the Department of the Environment advise local authorities not to authorise building on flood plains or flood hazard areas.


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