A square peg for a square hole

The ads that blare from our television screens shouting “cheaper home insurance” and “12 months for the price of nine” are generally calling out to the ‘standard’ customer:?the one who can fill out a standard form, giving answers within standard parameters without setting­­ alarm bells ringing. Those alarm bells are often labelled ‘subsidence’, ‘flooding’ and ‘criminal conviction’.

But there is an answer. Bureau Insurance Services offers policies specially designed for the non-standard customer, and in 2006 became the official provider of Biba’s non-standard household scheme. The scheme features a trio of products that cover some of the hardest property insurances to get approved: those for subsidence-impaired homes, properties that are prone to flooding and proposers with criminal convictions.

Bureau has been providing the first of these products, the PUPS (previously underpinned properties) scheme, since 1993. Bureau’s managing director, Chris Jordan, explains: “Subsidence was causing a major problem for people trying to get insurance, mainly because insurance companies had lost a lot of money to subsidence in the late ’80s and early ’90s.

“We thought that was unfair. If you can look at a property after it has been repaired and think that it’s as strong as any property and unlikely to subside again, it should not be a problem.”

Playing hard to get

Following the establishment of the PUPS scheme, Bureau decided to expand to other traditionally ‘hard to get’ household insurances.

Jordan explains: “We decided to branch out into flooded properties and to other situations where people found it very difficult to get insurance, one of which we found to be when they have a criminal conviction.”

The Flood Insure scheme, for properties that have previously flooded or are at risk of flooding, aims to insure properties where the risk has been substantially reduced due to remedial work carried out by the householder, local authority, river authority or Environment Agency.

Jordan says: “Flooding is more difficult than subsidence. If you have a problem with subsidence and you have taken action against the cause and underpinned the property, your house should be as stable as everyone else’s. If you have been flooded before, chances are you will be flooded again, so you have to look at what has been done to reduce any future damage.”

Another problem, according to Jordan, is that properties in problem areas may find it difficult to get flood insurance based on their postcode.

He says: “Even if you live on a hill 400 feet up, if you have a postcode in Lewes or Cockermouth, for example, you might have a problem because of the way that most mainstream insurers map out the country.”

Bureau’s solution to this is to individually survey every risk and look at them on a case-by-case basis. Cover is offered based not just on what has happened to the property in the past but on a review of what has been done since to fix things.

With conviction

Bureau applies a similar approach, but to individuals rather than properties, as part of its Fairplay scheme, aimed at people with criminal convictions who are trying to get household insurance. The company got an ex-probation officer to write an underwriting scheme that not only assesses the conviction and time spent in prison but the client’s current status.

Jordan explains: “Most insurance companies do not want to cover these people because they think there’s a large moral hazard there. But we look at a series of things. Have they got a job? Are they married or do they have a partner? What qualifications do they have? If they haven’t got a job, is it just because they’ve been made redundant? It’s more important what you are doing now than what you did in the past.

“It’s been an incredibly good scheme for underwriters, with very few claims. I don’t think we have ever had a moral hazard claim. If someone is looking for insurance, it probably means they take some pride in their possessions, and those are usually the people who are trying to go straight.”

Bureau’s stringent, personal approach to assessing risk has meant that underwriters have supported these normally tricky areas; PUPS is currently underwritten by AXA, while the other two schemes are underwritten by Lloyd’s.

Jordan says: “Just because we are an insurer of last resort does not mean that the schemes are underwritten by someone you have never heard of. That’s because the security of these schemes is exceptional. Also, all are accepted by building societies and lenders, which is a major factor: if you can get the insurance but it is not accepted, you would obviously be unable to get a mortgage.”

Bigger picture

The relationship with Biba came about after the association kept contacting Bureau with enquiries from members who were having problems in the broker’s particular areas of expertise. It is now on a rolling contract as official provider of these products, with 20% commission offered to members.

As a result of the Biba appointment, Bureau has attracted a greater share of business from brokers, whereas Jordan estimates that, previously, they only made up about half of those interested in the schemes.

He says: “We used to get quite a lot of publicity in the national press because our services were a bit different. So before the Biba agreement, a lot of people phoned us direct; I think it was about 50/50 between brokers and the public. But now I would say it’s more like 25% from the public and 75% from Biba members.”

As well as offering Biba members a specialist product that deals in difficult-to-cover risks, Jordan believes that the non-standard-property schemes show that the industry has a sense of social responsibility.

He explains: “It deflects from Biba, and the industry in general, any criticism that we are only interested in insuring those perfect risks. I mean, we are all in this to maximise income. But there are five million people in flood risk areas and about four million with non-motoring criminal convictions. That’s a massive amount of people and sometimes you think: there but for the grace of God go any of us.”

Bureau’s approach of surveying each different risk harks back to a more personal approach that Jordan thinks emphasises “the necessity of a broker”.

He says: “The biggest change in recent years has been the rise of direct writers and aggregator sites that are looking for perfect risks that can be written for very low margins. The more concentration there is on price being the only factor, the more mainstream insurers consider certain things to be ‘non-standard’ and do not want to get involved. This means less and less people can get insurance.

“No direct writer is going to send out a surveyor or talk to a client and analyse their lifestyle, because it costs too much money.”

This contrasts with what Bureau does, which Jordan describes as “old-fashioned underwriting at its very purest”.

He says: “There is no computerised way of telling if a house is really at risk from flooding or subsidence without actually seeing it. Someone actually needs to go and touch the brickwork and see how many trees are around and so on.

“It’s old-fashioned, but it’s the only way to get what we do done.” IT