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Introduction

This brief examines data supplied by the Association of British Insurers (ABI) on claims costs in the commercial and domestic property insurance markets.

Scope

An analysis of property insurance claims costs based on ABI statistics A discussion of claims costs arising from the four main perils: weather, fire, subsidence and theft

Highlights

Weather claims costs decreased considerably in 2006, by 35.1 per cent to £163 million. Commercial property insurers experienced favorable conditions, with few severe weather events. However, while weather costs fell, insurers' expenditure on such claims was higher in 2006 than in 2003 and 2004. The total costs of household insurance claims fell by 1.8 per cent in 2006 to £1.4 billion. This fall was driven by an improvement in weather claims, the costs of which fell by 35.5 per cent. However, this improvement was offset by an increase in the cost of fire, subsidence and theft claims.

Reasons to Purchase

Gain knowledge of the cost of property insurance claims in 2006 Gain insight into factors driving changes in the cost of commercial and domestic property insurance claims

DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Commercial property claims were benign in 2006, as a lack of any serious weather incidents kept claims numbers low 2
Commercial property claims costs resulting from fire, business interruption and weather damage all fell in 2006 2
Fire accounted for the majority of costs for commercial property claims in 2006 4
The number of commercial fires fell in 2006 across the UK 5
Weather claims costs for commercial property insurance declined in 2006 7
Business interruption claims costs, following fire and weather damage, fell in 2006 8
Theft claims costs increased in 2006 9
The increase in theft claims costs was due to a rise in average claims value in 2006 10
The household insurance market experienced a reduction in the cost of weather claims in 2006, but an increase in the cost of claims from other perils 12
The cost of domestic property claims fell slightly in 2006, as a result of a fall in weather related costs 12
Storm damage accounted for the largest part of the weather claims bill for household in 2006 14
The cost of domestic fire claims increased in 2006 15
The cost of household theft claims rose by 9.9 per cent in 2006 as both the number of claims and the average cost of claims increased 16
The number of burglaries fell by 3 per cent in 2005/6 18
The risk of burglary is heavily influenced by factors such as tenancy status and security measures 20
Subsidence claims costs grew in 2006 as did the average cost of claims 22
APPENDIX 24
Methodology 24
Further reading 24
Ask the analyst 24
Datamonitor consulting 24
Disclaimer 25
List of Tables
Table 1: Gross incurred commercial property insurance claims by peril, 2002-6 3
Table 2: Proportion of gross incurred commercial property insurance claims by peril, 2002-6 5
Table 3: Number of UK fires, by location, 2001-5 7
Table 4: Commercial property insurance weather claims costs, 2002-6 8
Table 5: Cost of business interruption claims by cause, 2002-6 9
Table 6: Total cost of commercial property insurance theft claims, 2002-6 10
Table 7: Number of commercial property theft claims, 2002-6 11
Table 8: Average value of commercial property theft claims, 2002-6 12
Table 9: Domestic property insurance claims by peril, 2002-6 13
Table 10: Gross claims incurred for domestic property weather claims, 2002-6 15
Table 11: Claims incurred by fire, domestic and total, 2002-6 16
Table 12: Number of household theft and average theft claims cost 18
Table 13: Number of burglaries in England and Wales, 1999-2006 19
Table 14: Unemployment among 18-24 year old males, 1998-2006 20
Table 15: Household types most at risk from burglary, 2004/5 - 2005/6 22
Table 16: Average subsidence claims cost compared to claims costs and number of claims for subsidence, 2002-6 23
List of Figures
Figure 1: Commercial fire, business interruption and weather property insurance claims costs fell in 2006 3
Figure 2: Fire claims continued to account for the largest part of commercial property claims costs in 2006 4
Figure 3: The number of commercial property fires fell in 2005 6
Figure 4: The cost of commercial property weather claims declined in 2006 8
Figure 5: Business interruption claims costs fell in 2006 9
Figure 6: 2006 saw a slight increase in the cost of commercial property insurance theft claims 10
Figure 7: 2006 saw a drop in the number of commercial property theft claims but an increase in the average value of claims 11
Figure 8: The total cost of domestic property claims fell slightly in 2006, as a result of a reduction in weather related claims 13
Figure 9: The cost of weather insurance claims fell in 2006 for domestic property 14
Figure 10: The cost of claims caused by fire grew in 2006 for domestic property 16
Figure 11: Both the number of theft claims and the average theft claims cost grew in 2006 17
Figure 12: Number of burglaries in England and Wales, 1999-2006 19
Figure 13: Homes with no security measures are at a very high risk of burglary; almost one in five was burgled in 2005/6 21
Figure 14: The cost of subsidence claims rose in 2006, while the average cost of subsidence claims increased only slightly 23