As part of our ‘Changing insurance needs’ series we focus on the Environment in this latest update. Global warming and the extreme weather conditions increasingly experienced around the globe are causing major disruption on what seems like a daily basis, but how will the insurance industry be affected?
Extreme weather causes significant damage
February 2021 is only part way through yet news headlines at home and abroad have been dominated by severe weather conditions and the devastation caused. It’s never been more important for individuals or businesses to have the appropriate insurance covers in place to protect them against environmental extremes. The more severe the situation, the deeper the cover potentially required.
- February 1 - Tropical Cyclone Ana, in Fiji wreaks havoc
- February 7 - Western Australia – disaster relief offered following forest fires and then severe flooding
- February 8 - A rare snowstorm hits Netherlands and a code red emergency is declared
- February 8 - Storm Darcy brings disruption to Europe
- February 11 - Lowest temperatures since 1995 hit the UK
- February 12 - Moscow sees record breaking snow fall
- February 16 - Greece and Texas experience unprecedented levels of snow
These were just some of the headlines recorded in the first weeks of this month but thankfully the impact to some degree will have been lessened by insurance protection - after all that’s what insurance cover is for!
The financial impact for insurers
Whilst insurance policies have afforded valuable cover in many claims cases associated with these events, severe weather conditions, as described, continue to put insurance companies under significant pressure as eye watering pay-outs need to be made.
Commenting on the predicted insurance losses due to ‘Storm Christoph’ which hit the UK in January causing widespread flooding across England and Wales, Mohammad Khan, General Insurance Leader at PwC UK, said: "It is still very early to say what the impact on the general insurance industry will be, but based on the current weather, PwC estimates that the losses from Storm Christoph will be between £80m - £120m.”
At the time of writing its thought that the cost of damage will be less than the losses that occurred from Storm Ciara last year. However, both storms illustrate the increasing frequency of such major weather incidents and the subsequent insurance claims triggered.
Environmental extremes have always been present but are increasingly hitting the headlines. The insurance market has had a difficult few years, in recent memory you only have to think back to the catastrophic impact of Hurricane Dorian which hit the Bahamas in September 2019. According to the Inter-American Development Bank, Dorian caused about $3.4 billion in damages, which was noted to being equal to one-quarter of The Bahamas' GDP. During the same year images of floods breaching homes, decimating businesses, damaging infrastructure and cancelling events remained common place nearer to home in the UK.
Insurance to protect against loss in these situations is vital, but at what cost?
Rising insurance premiums
With the seemingly increasing occurrence of severe weather related incidents, be it flooding; drought; forest fires; storm force winds or extreme temperature, the only sustainable option insurers have is to adjust their risk prices, the cost of which ultimately has to be passed onto the customer.
Whether it’s environmental issues as described; the impact of Covid-19 or other economic challenges forcing up insurance premiums, we predict that Insurance Premium Finance will be increasingly considered as a payment method enabling customers to meet these rising costs.
Since 1988, we have helped millions of businesses and individuals to pay for their insurance by spreading the costs over regular instalments, instead of paying the whole premium up front.
Today, we have over 2.1 million customers using our service and technology to process 24 million Direct Debits and fund advances of £3.6 billion.
It’s not just the customers who benefit. Brokers and insurers also gain from the third-party relationship with Premium Credit. As well as increasing payment options and customer choice, intermediaries have the potential to receive a percentage commission for every new credit agreement they set up for their customers choosing to pay in this way.
If you’d like to find out more about the benefits of our award winning insurance premium finance options, please get in touch.