Insurers should brace for weather-related claims as temperatures soar and drought is officially declared across parts of England
UK insurers should brace themselves for a rise in home insurance claims as scorching weather and drought conditions create the perfect conditions for wildfires to spread in the UK.
According to analytics agency GlobalData, climate change and extreme weather conditions will only increase the frequency and severity of weather-related claims.
GlobalData’s 2021 UK Insurance Consumer Survey found that weather incidents – excluding floods and storms – accounted for 10.8% of all home insurance claims. It predicted that this would increase in 2022 due to recurring heatwaves throughout the summer.
The UK’s National Drought Group officially declared that certain areas of England had entered a drought last week (12 August 2022).
Areas included in this declaration were Devon and Cornwall, Solent and South Downs, Kent and South London, Herts and North London, East Anglia, Thames, Lincolnshire and Northamptonshire and the East Midlands.
The group – which contains representatives from water companies, the Department for Environment Food and Rural Affairs (Defra), the Environment Agency, the National Farmers’ Union and Natural England, among others – declared a drought after prolonged periods of little or no rain.
Areas of South East England have experienced over 150 days of little or no rain since January – the longest dry period since the 1970s – according to the Met Office.
Beatriz Benito, lead insurance analyst at GlobalData, said: “Dried out landscapes are becoming a common sight in the UK this summer.
“When temperatures reached over 40 degrees just weeks ago, the media reported that around 60 homes in the UK had been destroyed after a surge in fires and these will inevitably lead to home insurance claims.”
Benito added that periods of prolonged high temperatures and dry conditions would increase the risk of wildfires.
He added: “Weather-related claims can be particularly devastating and are therefor expensive to insurers. Moreover, they may also claim lives, impacting other lines of business.”
Destructive picture
Commenting as droughts were declared across England, Stephen Smout, head of agriculture at loss adjustor McLarens, said: “Wetter winters with flash flood events and drier summers with drought paint a destructive picture.
“Rivers and farmland have not evolved to weather these extremes with river cultures and agricultural ecosystems becoming increasingly endangered.”
Smout explained that drought conditions would harm agricultural production as farmers were increasingly reliant on irrigation licenses issued by the Environment Agency.
Insurance Times reported that crop fire claims soared last month as forest fires raged across the UK.
Smout added: “The primary output of the South West of England is agriculture and dairy products. In these temperatures, cows come under heat stress, are more exposed to disease and produce less milk, so dairy production is likely to drop off.
“In addition, cows require 50% more drinking water in the heat. This will inevitably pile on financial pressure for farmers already grappling with increased inflation.
“With the rest of the UK industrial sectors, how is UK agriculture going to respond to the ever-increasing frequency of droughts – by coping or adapting?”
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