The future of park home insurance
10 March 2008
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.
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.
Need insurance cover?
See park home
insurance for policy details or call 0870 998
0281 for a quote.