Talking about standard and non-standard risks….
Paul Thompson, CEO Cavere Group, writes a regular column in Mortgage Introducer Magazine.
I read recently of a rise on non-standard household insurance sales. Apparently the non-standard category saw year-on-year growth of 9.3% from 2018 to 2019, compared to the 2.7% growth seen in the standard market.
Non-standard insurance is typically required for risks excluded from standard household policies such as underpinned properties, listed buildings, or risks associated with the policyholder themselves such as those with criminal convictions or a less than ideal financial history.
However, there are some ‘non-standard’ risks that surprise me considering how we live our lives today. The non-standard risk list also includes holiday homes, homes undergoing renovation, properties used for business and those with flood risk. Are these really non-standard? Surely not! Customers themselves are often surprised to discover their non-standard status when they apply for home insurance.
As mentioned above flood cover should no longer be considered a non-standard purchase thanks to Flood Re. Cover is available and for intermediaries it’s no different to selling buildings and contents. But did you know that 1 in 10 adults in the UK owns a second home (that’s 5.5 million people), or that the number of homeowners carrying out renovations rather than moving has increased five-fold in the last 6 years, or finally that according to the ONS 1.58 million people in the UK work from home?
Non-standard risks? I think not.
Our homes and our relationship to them are very different today than they were 50 or 100 years ago, perhaps even 10 years ago. Should we still consider a kitchen extension, a holiday property or working at home as abnormal? Standard price and risk modelling is not keeping pace with the changing needs of customers and the new normal of their lives in 2019. A more complex set of underwriting rules is required for standard policies, rather than just simply offering non-standard add-ons or standalone additional policies. Just as Cavere has already done with flood, we’re certainly speaking to insurers to clear the path for other non-standard risks. I believe as a GI provider we’re perhaps best placed to be the incubators that drive this change.
Rather than just adding more non-standard offerings to panels GI providers should start leveraging our relationships with insurers to champion more creative ideas and underwriting, build more innovative home insurance products, and deliver the more personalised, precise and cost-effective policies that not only do homeowners require, but that also enable our brokers an advisors to build lasting value driven relationships with their customers and differentiate their proposition.