In recent years, the United Kingdom has witnessed more volatile weather events from heavy rainfall and flooding to intense storms and heatwaves. This has led to a spike in weather-related insurance claims.
Financial Impact of weather-related claims on UK insurers
The increasing frequency and intensity of storms, the growing costs of repairs, and losses due to growing fraud, leaves insurers and policyholders alike feeling the pressure. Recent numbers from the Association of British Insurers (ABI) indicate that the amount paid out in the three months to the end of June 2024 hit £1.4bn, a 5% increase on the first quarter of the year and the highest figure of any quarter since it started collecting the data in 2017. The ABI confirmed the increase was largely driven by a leap in weather-related claims, as payouts for damage to UK homes from storms, heavy rain, and frozen pipes hit £144m, and another £81 million for businesses.
Impact on customer service and claims management
The rise in weather-related claims has affected how insurers handle customer service and claims management. The volume of claims during major weather events can overwhelm insurers, leading to delays and increased pressure on customer service teams. Insurers should, and mostly are, investing in digital solutions to streamline claims processing and improve customer experience. This includes online claim reporting systems and improved claim assessment tools which help accelerate the claims process and provide timely support to policyholders.
Rising opportunistic fraud in the UK
In addition to the growing frequency and intensity of storms, a rise in the volume and complexity of insurance fraud is further contributing to capacity to manage claims losses. Unfortunately, 10% of that on average is likely to be fraud according to Forbes magazine. Insurance fraud can be found across every line of insurance and range of severity. Fraud may be committed by opportunists, which occurs frequently after large catastrophic (CAT) storm events. An influx of storm-related claims makes it easy for people to stage accidents, make false claims of loss, or exaggerate the damages. Fraud can also happen in a more organised manner, with unscrupulous vendors preying on the insured, and misleading them that a full roof replacement, for example, may be well within the possible claim settlement.
According to the ABI, EY figures show that, “in 2022, for every £1 property insurers received in home insurance premiums, they paid out £1.22 in claims and expenses.” Finding ways to clamp down on fraud can make an immediate impact on improving loss ratios, and perhaps even neutralising losses without having to further increase premiums.
Improved P&C claims risk management providing a ray of hope for UK insurers
Despite the daunting challenges, a modern risk assessment strategy can pay significant dividends in helping keep up with the complexity of fraud tactics and techniques. Insurers implementing modern risk identification technologies can reduce their fraud exposure, improve loss ratios, and introduce efficiencies into their claims handling processes, ultimately reducing operating expenses, perhaps reducing premium increase needs, and even extending writing viability in flood-prone markets.
To learn how Clearspeed is helping insurers clamp down on claims fraud using simple voice-based questionnaires to triage and get you on the fast path to settling genuine claims, while narrowing your focus on those that need attention, visit our Insurer’s Guide to Better Identifying Risk in CAT Claims.
