Park Home Insurance - The Future
10th March 2008
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Without question, 2007 was an expensive year for the insurance
industry as a consequence of the appalling storms and floods which
hit many parts of the UK in June and July.
The actual costs to the industry are still to be finalised but
are likely to be between £3bn and £5bn!
In respect of the Park Home, Leisure Home and Holiday Caravan
sectors, losses are likely to be in the region of £25m and probably
higher. Unfortunately exact figures are not available but the
final figure will be significant.
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One of the more attractive features of Park Homes, Leisure Homes
and Static Holiday Caravans is their proximity to water, many parks
are located adjacent to rivers, lakes or the sea and many more are
located within flood plains or areas which are susceptible to
flooding. One leading UK insurer estimates that as many as
30% of static caravans are located within such locations whilst the
figure for Park and Leisure Homes is not as high at about 25%, this
represents a significant number of units at risk.
However there are mitigating circumstances. All Park
Homes, Leisure Homes and Holiday Caravans are raised off the
ground, often to a height which is above the highest previously
recorded flood levels and increasingly, more and more Holiday
Caravans especially are being fitted with flotation systems which
have proven to be very effective in protecting the caravan from
flood damage – when they have been properly fitted! In some
cases the caravans can be moved to higher ground and many parks are
located on the river bank but on the opposite bank to the flood
plain making them very unlikely to flood.
For these reasons, insurers should be very careful when
considering their response to last year’s floods. It would be
very easy to apply a blanket exclusion for any risk within a flood
plain based simply upon postal codes. It may work for
properties built of bricks and mortar which cannot be raised, but
postal codes (which are, it seems, the answer to the modern-day
underwriter) take no account of local conditions. They are
simply not sophisticated enough, although they are undoubtedly a
good starting point.
Insurers should however continue to offer terms to their
policyholders who have suffered a flood related loss, although
those terms may differ from those offered previously. They
may not however wish to increase their exposure on any particular
park or in any particular postal district and may therefore decline
new risks at those locations.
Towergate Bakers insure a large number of Park Homes, Leisure
Homes and Static Holiday Caravans in areas which have flooded or
are liable to flood. Our approach to date has been to be as
flexible as possible, taking into account local
circumstances. Whilst a small percentage increase in premium
rates has been implemented across the board, we have also reviewed
and continue to review our response on a park-by-park basis and
this approach has been well received and appreciated by both
existing policyholders and new potential policyholders.
Typically we have insisted on the fitting of a flotation system or
required the units to be raised above the previously recorded flood
levels – where it is safe and practical to do so. We have
also introduced a modest policy excess to reduce the likely
exposure to losses for property which cannot be raised, such as
outbuildings and garden furniture, or property stored under the
caravan. These measures are considered by all to be fair and
sensible.
The reaction of other insurers varies, some have withdrawn flood
cover altogether to both existing policyholders and new ones.
Others have introduced a cap on their liability for a particular
postal area. This means that they may stop taking new
business in that area or they may actively seek to reduce their
liability by not offering renewal to existing clients. This can of
course be quite random.
Historically, insurers have written this type of business using
a premium rate which applies to all postal codes so that a risk
insured for say £40000 costs the same to insure wherever it is
located in the United Kingdom. This may change. Already some
insurers rate such risks by postal code which takes no account of
local circumstances and this is likely to increase. If your
insurer is one of those you can expect to receive a higher than
average hike in your insurance premium. And this could affect
as many as 30% of static caravan owners or 25% of Park Home owners
even though your park has never flooded, is never likely to, and
even though you may have invested in a flotation unit for
example.
Climate change and the effects of climate change are for real
and will increasingly impact upon insurers and the cost of
insurance. But in the future and in some cases already it is
not a question of how much insurance costs but whether or not it is
available at any price, already many people are finding that their
property is uninsurable. With this in mind it may be very
worthwhile staying with your present insurer if you are happy with
their service and the cover they provide, even if it means
forsaking a short-term premium saving elsewhere. If however
the potential saving is just too good to miss make sure switch with
care! And if you are not happy with the approach your present
insurer takes in relation to the flood risk, seek an alternative
who can give you the peace of mind you desire and deserve.
