UK fire and subsidence claims will rise due to extreme heat, says insurer

One of the UK’s largest home insurers has warned over the impact of record temperatures on claims, saying the climate crisis was already resulting in a rise in fire and subsidence cases this year.

LV=General Insurance (LV=GI), which was bought by the German insurer Allianz in 2019, said it was dealing with claims worth £1.2m after the extreme heat that hit the country between 17 and 20 July.

Most of those cases related to fires starting in nearby open areas or heathland that spread to homeowners’ gardens, resulting in fence, garage, greenhouse and decking fires, with 8% of cases involving the total loss of a home.

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The firm said already-dry soil and the prospect of further hosepipe bans could also result in a spike in subsidence, causing the ground beneath a building to sink and pull the foundations down with it.

LV=GI said there had been a 205% increase in subsidence cases between June and July, and that extreme heat in August could result in a similar spike in claims to 2018, when they rose 51% due to exceptionally hot weather.

Its analysis showed that rainfall across southern and central England was already lower than in 2018, raising the prospect of homes sinking because of unstable soil.

“We’re really starting to see the effects of climate change and the impact this is having on homes – whether that be storm, flood, fire or subsidence claims – which have all risen in recent years depending on the season,” Sarah Smith, the head of home underwriting at LV= GI, said.

She suggested that developers and city planners should carefully consider where new housing is built, to help prevent further damage.

“As a country, we’re going to need to adapt and ensure existing houses are better protected, as well as really consider the locations planned for new houses which may be in areas more prone to events such as fires starting and spreading rapidly,” she added.

Meanwhile, the motor insurer Admiral revealed that its pre-tax profits nearly halved in the first half of the year, due in part to a rise in road accidents claims compared with the height of pandemic restrictions. Pre-tax profits fell to £251m compared with £482m last year.

The insurer said it had also been forced to increase premiums by about 16% between March and July this year to offset the higher costs of spare parts and motor repairs.

Meanwhile, Aviva announced plans to increase shareholder payouts after reporting a 14% rise in operating profits to £829m in the first half of the year. The insurer has been under pressure to increase returns since the activist investor Cevian Capital revealed a 5% stake in the insurer last year.

The Swedish investment firm has been pushing Aviva to return £5bn in excess capital to shareholders by the end of this year. Aviva said on Wednesday it would launch a share buyback programme but would decide on its size at the end of the year.