August 3, 2007 / 7:49 AM / 10 years ago

Insurers hike premiums following flooding

LONDON (Reuters) - Some of Britain’s biggest insurers say they will hike insurance premiums following the worst floods in the country in 60 years.

Householder Jeff Clarke recovers furniture from his flooded home in Tewkesbury, central England, July 24, 2007. REUTERS/Darren Staples (BRITAIN)

Norwich Union -- the UK’s largest general insurer with a market share of 14 percent and 4.3 million customers -- said it would increase home contents and buildings insurance.

New customers and those renewing policies from Monday will pay an average of 10 percent more, said a spokeswoman for the company, which insures one in five households.

Norwich Union said the imminent increase was related in part to two bouts of flooding that have ravaged parts of England this year, killing nine people and damaging houses and crops.

The price increases will apply to all customers and not just those affected by recent flooding.

Other insurers will follow suit. Royal Bank of Scotland, Britain’s second largest general insurance provider, said it would raise its premiums, but declined to say by how much.

The company owns well-known insurance brands Direct Line, Churchill, Privilege and Tesco Personal Finance.

“We do recognise that premiums will rise, and that goes for all RBS (insurance) brands,” said a spokeswoman for Direct Line.

Lloyds TSB said it was too early to say whether it would hike its premiums.

“From the outset of the floods, we have had this question (of price rises),” said a spokesman. “But the clean-up operation is underway and any impact on premiums at this stage is too early to call.”

Leading catastrophe-exposure modelling firm Risk Management Solutions has estimated the total cost to the insurance industry of this summer’s flooding at 3.3 billion pounds.

Aviva, which owns Norwich Union, said on Thursday that the June and July floods -- brought about by the wettest summer since records began -- would cost it 340 million pounds and affect its general insurance results.

The firm said it expected a bill of 165 million pounds from the July floods, which badly hit central and western parts of England, on top of expected claims of 175 million pounds from the June floods.

However, the Norwich Union spokeswoman told Reuters that other factors had also contributed to the price increases.

“The industry as a whole has seen pretty flat premiums in household buildings and contents market for around 10 years,” she said. “Clearly, the floods have come at this time, but premiums have been under review for some time.”

The increase was also down to Britain’s passion for home improvements and expensive gadgets, she added.

”People are spending more on home improvements. When things go wrong they’ve got flat-screen televisions and expensive flooring.

“So, when the do damage, it’s costing us more (in claims).”

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