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building insurance sky-rocketing

Covering Market, Trends, and Practical (but see LEMON-AID for Building & DIY)
merluzzo
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building insurance sky-rocketing

#357878

Postby merluzzo » November 18th, 2020, 6:24 pm

My partner owns a flat in a block of 12 flats. She lets the flat out.

A problem that has raised its ugly head in recent years has been the massive increases in the cost of building insurance.

This is due to the fact that the piping of the flats was probably not put together too well and there have been several leaks. I know for a fact that some of the flat owners have exploited the situation and claimed extravagant sums to have their rooms fixed (the record being near 20k).

This has caused some insurers to refuse covering the building altogether and the price of those who were prepared to cover it to increase strongly.

This river of claims is likely to continue. My question is whether in the future there is a way to check the real extent of each damage and limit the claims accordingly. I know that in theory the insurers should check claims and try to pay as little as possible, but in reality this does not seem to happen.

Given that the insurance is arranged by the management company, isn't their job to check that claims are realistic? My partner does not want to make enemies among the other flat owners, but the insurance costs are now close to make the letting business non-viable.

monabri
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Re: building insurance sky-rocketing

#357979

Postby monabri » November 19th, 2020, 9:00 am

The new kitchen.... :(

We own a ground floor flat with just one flat above. They owners of the flat did zero maintenance in over 20 years and lo and behold there were two leaks one caused by them and one accidental. . In both cases, the leaking pipes were in the roof/floor between the flats. Our ground floor flat was deluged and the tenant had to move out for 6 weeks whilst our newly fitted bathroom was ripped out , plaster removed and replastered, bathroom re fitted.. Plaster was also removed from the whole run of one wall of the lounge. The workmen had to use dehumidifiers running for weeks to dry the walls before replastering. The owners of the flat upstairs claimed for new "everything ".... No one questioned the extent of damage to their kitchen units even if water could defy gravity and run uphill. We got stuffed with an insurance claim and an excess.

The second leak from their flat brought down a communal porch roof. We agreed to go 50:50 on the costs.

I do feel that the remedial work was overkill and contributed to excessive claim cost...

Having installed a nice new kitchen and bathroom ( no doubt an overclaim on the insurance for the kitchen)....the owners then promptly sold the flat.

barchid
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Re: building insurance sky-rocketing

#358591

Postby barchid » November 20th, 2020, 8:49 pm

merluzzo wrote:My partner owns a flat in a block of 12 flats. She lets the flat out.

A problem that has raised its ugly head in recent years has been the massive increases in the cost of building insurance.

This is due to the fact that the piping of the flats was probably not put together too well and there have been several leaks. I know for a fact that some of the flat owners have exploited the situation and claimed extravagant sums to have their rooms fixed (the record being near 20k).

This has caused some insurers to refuse covering the building altogether and the price of those who were prepared to cover it to increase strongly.

This river of claims is likely to continue. My question is whether in the future there is a way to check the real extent of each damage and limit the claims accordingly. I know that in theory the insurers should check claims and try to pay as little as possible, but in reality this does not seem to happen.

Given that the insurance is arranged by the management company, isn't their job to check that claims are realistic? My partner does not want to make enemies among the other flat owners, but the insurance costs are now close to make the letting business non-viable.


Possibly another way to "skin the cat" in this instance is to greatly increase the excess amount on any claims.
I had a flat with a similar issue in the block but once the excess went up 10 years ago to £500 a claim, lo and behold, the claims started to dry up (no pun intended), the inurance policy became cheaper due to the high excess and within 3 years the claims, having normalised, saw the premium drop much further. It saves a lot of ill feeling doing it that way....

merluzzo
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Re: building insurance sky-rocketing

#358872

Postby merluzzo » November 21st, 2020, 6:44 pm

Thanks, good to know that at least we are not the only ones having this problem!

Increasing the excess sounds like a good idea! Not sure it will be popular though.

I wonder who has the final say in this matter - is it the management company or the leasehlders?

dealtn
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Re: building insurance sky-rocketing

#358969

Postby dealtn » November 22nd, 2020, 9:59 am

merluzzo wrote:Thanks, good to know that at least we are not the only ones having this problem!

Increasing the excess sounds like a good idea! Not sure it will be popular though.

I wonder who has the final say in this matter - is it the management company or the leasehlders?


The management company is answerable to its shareholders. These are typically the leaseholders.

JonE
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Re: building insurance sky-rocketing

#359003

Postby JonE » November 22nd, 2020, 12:56 pm

dealtn wrote:The management company is answerable to its shareholders. These are typically the leaseholders.
The obligation to arrange the insurance of the freeholder's property is contained in the lease. The obligation for leaseholders to pay for it is also in the lease. Sometimes some or all of the leaseholders also wear the hat of freeholder by having 'share of freehold'. Sometimes an external management company is employed and sometimes it's handled by leaseholders collectively (perhaps under the umbrella of the freeholding company in which some or all of them have shares).

What's 'typical' may vary across the country. Generalisations that might apply to houses split into just 2 flats may be totally inappropriate for massive, purpose-built mansion blocks. There are quite a few permutations of structure and organisation between the extremes.

In blocks where I've had flats (corporate freeholder, ARMA managing company, hundreds of leases) the Service Charge Account (having enjoyed lower premia because of high excesses) pays the excess for problems related to common parts and 'just one of those things' incidents but individual leaseholders are charged with the excess for problems arising attributable to what is their responsibility according to their lease. An example of the latter might be water pipes (and the stopcock itself) where the pipes serving an individual flat come off the shared pipes.

Those who regard themselves as 'responsible' leaseholders tend to support higher excess for lower premium on assumption that they are careful and 'it won't happen' to them. That group has always won the day in my experience.

Cheers!
Last edited by JonE on November 22nd, 2020, 1:04 pm, edited 1 time in total.

ReallyVeryFoolish
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Re: building insurance sky-rocketing

#359005

Postby ReallyVeryFoolish » November 22nd, 2020, 1:04 pm

I do know of an instance locally where a commercially managed block of flats happened to have an insurance broker owning a couple of the apartments as BTL. The individual got tired of he and the other owners being fleeced for insurance cover. So he got a proposal together and presented it to the management company who after evaluation took the policy out saving all the owners a packet every year. So, it is possible to influence the outcome. I also know of a case where owners got tenders at much lower prices for decorating of all public areas of the development. It can be done.

RVF

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Re: building insurance sky-rocketing

#359008

Postby mc2fool » November 22nd, 2020, 1:19 pm

merluzzo wrote:Increasing the excess sounds like a good idea! Not sure it will be popular though.

I wonder who has the final say in this matter - is it the management company or the leasehlders?

The lease does. What does it say in the lease about insurance and who is responsible for the excesses?

"Water leaks are commonly covered by insurance, but there is likely to be an excess payable. The excess on buildings insurance will either be recoverable from the party responsible for the leak or all leaseholders through the service charge depending on whether it is a “fault based claim” and on the wording of the lease. An example of a “fault based claim” is someone letting their bath overflow. Even though this is not intentional it is likely to be seen as negligent."

https://www.lease-advice.org/article/water-is-leaking-from-my-neighbours-flat-and-damaging-mine-who-should-pay-for-it/

You say in the OP that, "the piping of the flats was probably not put together too well", which sounds like a general maintenance issue in the block, and as such the excess should be paid by the insured and recovered from all leaseholders through the service charge.

Also, you say, "some of the flat owners have exploited the situation and claimed extravagant sums to have their rooms fixed". Even if paid by the person responsible, I don't see how raising the excess is going to stop "extravagant" claims of the sort you are talking about. If the gaming-the-system owner has had a genuine, say, £3000 worth of damage to repair, how is them having to pay, say, £500 vs £150 excess going to stop them inflating it to a £6000 claim?

It may stop them making a claim at all, but then they're left with £3000 worth of damage, despite having paid for insurance in the service charge.

Here's a couple of other links on excesses which I came across in googling....

https://www.1stsureflats.com/faqs/flats-insurance-who-pays-excess/
https://naylorllp.co.uk/2016/10/03/water-leak-from-neighbours-flat-who-pays-the-insurance-excess/

merluzzo
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Re: building insurance sky-rocketing

#359204

Postby merluzzo » November 23rd, 2020, 10:07 am

Good points mc2, thanks for the links.

I learnt that in my partner's case there is now an excess of £5000 (!) and that in the event of a leaking pipe (no-fault) this has to be covered by all leaseholders through the service charge.

I guess the management company has a duty to check the damage and make sure that claims are reasonable? I don't think that a shared excess alone is going to deter people from claiming as much as they can.

mc2fool
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Re: building insurance sky-rocketing

#359235

Postby mc2fool » November 23rd, 2020, 11:26 am

merluzzo wrote:I guess the management company has a duty to check the damage and make sure that claims are reasonable?

I must admit I'm a little curious as to how the "extravagant" claims got through the claims adjuster. In my experience, and that of just about everyone I know, insurance companies work hard to pay out the minimum they can get away with! No adjuster is going to let a claimant claim for a gold plated Harrod's kitchen to replace a damaged Ikea one, or the like. And whatever can be got by the claims adjuster can, I'd have thought, be got by anyone else less experienced in assessing claims.....

merluzzo
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Re: building insurance sky-rocketing

#359654

Postby merluzzo » November 24th, 2020, 3:38 pm

I must admit I'm a little curious as to how the "extravagant" claims got through the claims adjuster.


I have to say I am puzzled by this too, but I have knowledge of several cases of building-related claims in which the insurance has been very generous and could have saved considerably (say up to 30-50%) by using a stricter adjuster.

Why do they behave so? I have no idea, and it is counter-intuitive. Perhaps they only investigate in depth claims they suspect may be fraudulent and have a sort of lax approach to the remaining cases (obviously things may be different for very expensive claims).

Perhaps there is something there for the adjuster, one may think, but in some of these cases the claimant were given freedom to choose their contractor for the repairs. It would be very interesting to hear from somebody with insider knowledge...

richlist
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Re: building insurance sky-rocketing

#360380

Postby richlist » November 26th, 2020, 5:22 pm

Id just like to share my experience with leasehold buildings insurance.

* Buildings insurance premiums can be significantly reduced by accepting to pay an excess or increasing an existing excess.

* Where a lease says that buildings insurance is included in the service charges paid by leaseholders then that is exactly what the leaseholder should receive. If there is an excess to pay then they should have the excess reimbursed by either those responsible for arranging the insurance OR the person responsible for causing the leak, but only if that person has caused the leak through negligence.

Howard
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Re: building insurance sky-rocketing

#360415

Postby Howard » November 26th, 2020, 6:30 pm

merluzzo wrote:
I must admit I'm a little curious as to how the "extravagant" claims got through the claims adjuster.


I have to say I am puzzled by this too, but I have knowledge of several cases of building-related claims in which the insurance has been very generous and could have saved considerably (say up to 30-50%) by using a stricter adjuster.

Why do they behave so? I have no idea, and it is counter-intuitive. Perhaps they only investigate in depth claims they suspect may be fraudulent and have a sort of lax approach to the remaining cases (obviously things may be different for very expensive claims).

Perhaps there is something there for the adjuster, one may think, but in some of these cases the claimant were given freedom to choose their contractor for the repairs. It would be very interesting to hear from somebody with insider knowledge...


In answer to your question, generally in a distressing flood case where the insured has not claimed before, an insurance company will be relaxed and generous. They know the background of claimants because they share data with other insurers. A first (non fault) claim, however large, will almost certainly be treated sympathetically.

When someone has a Rolex watch destroyed in a small household fire, if it is their first insurance claim, they will probably get a shiny new Rolex. If it is the second or third claim for a burnt Rolex the loss adjuster will probably insist on raking through the debris to find the incinerated carcass of the watch. (Loosely based on a true story).

Given that insurers share claims data, even if each flat is insured by a different company the first two or three flood claims may be treated generously but word (data) gets around and the premiums are increased when the risk of further big claims are likely.

If a block of flats has dodgy plumbing and significant flood claims are made, the average large insurer will know more about the risky plumbing and its shortcomings than the tenants or landlords. The details are all on the shared database.

The major insurance companies who underwrite property hold massive amounts of data. Vast databases which are used to calculate a premium. When we talk to them, we might judge them on their junior front line staff in a call centre. But we are actually negotiating with very sophisticated risk management programmes. And the people at the top run them just as we might run our own business. They really want to help people who are caught up in a distressing situation. Good service is usually very good for generating new business. Even if the premium is £300 and the claim is £30,000. But they aren’t silly. Sadly two or three large claims in a building and premiums are increased.

regards

Howard


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