July 2022 went down in UK climate history as the first time the UK exceeded temperatures of 40°C[i]. For property insurance providers, the prolonged spell of hot, dry weather this summer resulted in increased fire risks and a rise in subsidence claims. LV= General Insurance (LV= GI) said in August that subsidence cases are already up 205% between June and July[ii]. At that time, it was dealing with claims costs totalling £1.2M which are related to fire and subsidence incidents between 17-20 July following the extreme heat.
As night follows day, the hot spell was followed by and flood alerts, torrential downpours and flash floods in parts of the U.K[iii].
All the major weather models are predicting a change in weather patterns across the UK as a result of climate change.
Aside from increasing fire, flood, and windstorm risks, experts warn that the number of properties in Great Britain facing subsidence issues and damage to property from shrink-swell is on the rise, with figures of just 3 per cent in 1990 likely to reach 10 per cent by 2070[iv]. Our changing climate could see subsidence extend into regions where it is currently not a risk while regions that are already at risk may also see increases. For example, in London, the amount of properties at risk from subsidence is projected to increase to over 50% by 2070 from todays 20% at risk.[v]
It is clear that insurance providers could be exposing themselves to increased losses if they fail to gain a complete picture of property risk. Data enrichment at the point of quote can enable them to understand environmental risks for a particular property while data mapping can also provide a more detailed view of risk for one property or a whole book of business.
Geospatial data visualisation tools such LexisNexis® Map View can aggregate data from multiple sources, allowing insurance providers to intelligently map this data to gain an accumulated and granular view of property risk. This supports risk selection and pricing of exposures.
In the case of subsidence, the propensity can be calculated and delivered as a risk score using data on the average or expected weather conditions, coupled with soil type, the pattern of clay rich soils, the proximity of large trees and types of ground movement.
Insurance providers can also view granular data on the property characteristics and soon, past claims related to the property accessible through the market wide contributory claims database – LexisNexis® Precision Claims.
By combining data on the perils, the place, the property, past claims and the policyholder, insurance providers can put themselves in a far more powerful position to provide a more accurate and fairer premium to the policyholder and help protect themselves from losses.
Climate change is happening, this summer has provided yet another stark warning. Timely, accurate and often ‘live’ data is the insurance market’s friend in helping to mitigate the increasing risks their customers face.
Heikki Vesanto, Manager GIS Data Science, Insurance, UK & Ireland, LexisNexis Risk Solutions
[v] British Geological Survey- May 2012