Is the cost of home insurance climbing?
Many people who have had renewal notices pop through their letter boxes in recent months will have been dismayed to be hit with insurance hikes of 10 per cent or more, despite having made no claims in recent years.
What is driving these hikes?
Insurance companies point to a scarcity of tradespeople, more expensive building materials and higher wages, while a spike in the price of energy and fuel is also pushing up prices.
How much are we talking?
That depends on the property, the location and the insurance company. Annual price increases of between €50 and €100 are by no means unusual.
Some people living or working in areas at risk of flooding can be asked to pay eye-watering sums for cover. And then there are the people who can’t get cover, the so-called “uninsurables”.
And are there many uninsurables?
As many as 100,000 homes and business premises across the State cannot get flood cover, according to recent data from the Central Bank, and that number will increase as the impact of the climate crisis deepens.
And this impacts only those whose homes have been flooded, right?
Wrong. Many uninsurables have never made a claim. But they struggle to get cover because the insurance companies have done their homework and know more about where those people live than they do themselves.
How do they know so much?
The insurance industry works off a database that has digitally flood-mapped every Eircode using the OPW’s floodinfo.ie website. It knows which homes are within 50m of water and factors in soil composition and speeds of drainage. The insurance companies use this data with their own claims experience to work out the level of risk for a particular area.
So, what are the solutions?
The first and most obvious step is to stop building in areas vulnerable to flooding.
What is needed to protect those in areas increasingly under threat is more and more permanent flood defences. They provide security and increase the chances of people securing insurance.
How does that happen?
Once the Office of Public Works puts in flood defences it gives the insurance industry a detailed breakdown of work done and how the specific areas are benefiting. The data is factored in when selling policies. “It you are in an area that is protected by a one-in-100-year flood-defence system insurers would be more comfortable insuring the property,” one industry source said.
One in 100 years seems oddly specific ...
It is an industry term which means if your home is deemed to have a 1 per cent chance of flooding in any given year you’ll get cover.
[ Ireland’s interface with climate change: extreme floodingOpens in new window ]
If one company turns me down does that mean all companies will?
No. Companies operate different models and might have different appetites for risk in certain areas. “Different insurers will price risk slightly differently,” says Daragh Cassidy of price comparison website bonkers.ie. “So while you might look uninsurable to one insurer, or only be insurable at a high cost, another may be prepared to take on the risk at a slightly more affordable price.”
If I can’t get flood insurance does that mean I can’t get insurance at all?
No. Many companies compartmentalise their policies and while they might strip out flood protection, they will offer cover for other risks such as storm damage, fire and break-ins.
But is having full house insurance not a legal obligation?
No. The only insurance that is legally required is motor insurance, though many banks make getting adequate home insurance a condition of a mortgage.
So if I can’t get flood cover, does that mean I can’t buy a particular house?
It might make things more difficult for those trying to buy homes in uninsurable areas and those trying to sell them. Banks take a case-by-case approach and some may be happy to extend a mortgage as long as all elements of a typical household policy are in place; others can be more inflexible.
If I have to go without insurance, what exactly are the financial consequences of a flood?
There is no sugar coating it, they can be horrendous. Only those who have experienced flood water in their home truly understand the scale of the damage it can do. It is not a case of the water running in and then running out again. Floorboards and walls, furniture and soft furnishings, and, electronics can be destroyed, as well as all personal possessions that come into significant contact with flood water. It takes a very long time before the damage is repaired. The psychological impact can be even more severe.
So beyond flood defences and rethinking where to build, what else can be done?
Ultimately, the State might have to step in. “There may need to be some type of Government ‘insurer of last resort’ to cover those who can’t get cover at all, as the problem is likely to only get bigger over the coming years,” warns Daragh Cassidy. Many thousands of people will have little option but to hope for the best and pray that the rising waters don’t breach their homes and businesses before the defences and financial supports they need are put into place.
[ Chambers pushes back on State role in flooding coverOpens in new window ]
What about other extreme weather events?
Much focus is on flooding as it is the most easily quantifiable risk. It is not, however, the only risk, as recent storms have shown. It seems likely that as more extreme weather events become more commonplace, insurers will have to price them into their premium costs and that will drive prices higher for everyone.
