Parametric policies and extreme weather driving home payout increases

Extreme weather events in the UK rose 43% between 2020 and 2024, with national weather service the Met Office describing the UK climate as “notably different” to just a few decades ago and pinpointing extreme weather events as the “new normal”.

This is according to new research from data and analytics firm Sagacity, which also highlighted that weather related home insurance payouts rose 55% to £226m between Q4 2024 and Q1 2025.

Sagacity said the increasing volume of extreme weather events, combined with the growing adoption of parametric policies – a type of policy where payouts are triggered by predefined parameters such as rainfall or windspeeds exceeding a certain level – was driving the uptick in payout amounts.

The firm also said that traditional postcode level data may not be sufficient for predicting dynamic weather risk and that insurers should turn to real-time, third party data – such as water level sensors and live weather forecasts – to price policies.

Real-time data

Dean Standing, chief revenue officer at Sagacity, said: “The intensity of weather events like flooding and high winds is rising and insurers need to equip themselves to stay on top of this evolving risk.

”Traditional, postcode level assessments are no longer enough. Accurate, real-time data must sit at the heart of decision-making.

“That means going beyond internal customer records and incorporating trusted third party intelligence, such as property level mapping, infrastructure resilience and live weather feeds to get a precise view of each customer’s exposure.

“This insight is critical for pricing policies, informing risk models, processing claims efficiently and detecting and preventing fraud.

”Insurers that build artificial intelligence (AI) and machine learning capabilities and integrate data deeply into their operations will be best placed to protect their bottom line in an increasingly volatile environment.”