How insurers cope with shifting ground caused by summer heatwaves

Although the industry will never be able to eradicate subsidence completely, Stephen Linklater, claims director at Ageas, says the inevitable rise in claims for property damage caused by warmer weather means insurers must endeavour to reduce the negative effect on their customers.

Linklater’s words of warning come after the Association of British Insurers found the summer heatwave of 2022 led to a significant surge in subsidence claims – the equivalent of one new claim every 15 minutes during the second half of 2022.

With record-breaking heatwaves becoming a regular occurrence during the UK’s summertime, and temperatures soaring above 40C for the first time on record last year on 19 and 20 July, Linklater believes insurers must prepare for these surge events to become the norm.

Subsidence is one of those natural events that, unfortunately, you’ll never be able to eradicate completely. But what we can do as insurers is strive to minimise its impact on our customers.

Stephen Linklater

He says: “There are some forces in nature that are beyond our control and subsidence is one of those natural events that, unfortunately, you’ll never be able to eradicate completely. But what we can do as insurers is strive to minimise its impact on our customers.

“Having the right resources and expertise in place is vital, and we see suppliers as integral to the way we support our customers through these often-lengthy claims.”

Linklater says Ageas undertakes a rigorous process to ensure it is working with the right loss adjusters that have the technical expertise and resources to resolve these claims as swiftly as possible for our customers.

Getting ready

Key to preparing for a surge in subsidence claims linked to climate change becoming the norm is understanding the cause of the damage.

One of the main causes of subsidence is clay shrinkage, according to Jeremy Trott, claims director at Ecclesiastical Insurance, who says this is why his firm works closely with suppliers to ensure they are prepared for any sudden increase in demand.

Subsidence occurs when the ground under a property collapses, or sinks lower, because it loses moisture following long hot dry spells in weather. The damage can also be exacerbated by trees and shrubs, which can absorb significant amounts of water from the soil causing further shrinkage.

What is needed now, in the wake of climate change, is a far more collaborative, longer-term partnership approach across the whole supply chain.

Greg Rees

Houses built on clay soil, which shrinks when there is less moisture in the ground, are particularly vulnerable to subsidence in prolonged dry spells. Clay soils are found in London, the South East, the Midlands, the North East and North West.

To prepare for these areas being hardest hit by subsidence when temperatures soar, Greg Rees, head of subsidence at Claims Consortium Group, says insurers should be reviewing their supply chain networks well ahead of the anticipated spike in claims.

He observes claims for this type of damage “can be extremely complex and of an unusually long duration”, and adds: “An effective supply chain with intelligent triage processes that put technical expertise at the forefront of claims will ensure both consistently correct outcomes and a better claims journey for end customers.

“This approach also ensures that claims will be handled by the most appropriately qualified person at the right time, in the right way.

“Claims service providers need to not only have the right specialist skills in place to correctly diagnose the underlying causes, and likely impact of cracks in buildings, but be agile and scalable in terms of delivery on the ground to effectively deal with spikes in volume.”

To reduce the ongoing risk of a surge in claims, Rees says insurers must avoid the quick win and low-fee supply model, which has caused havoc for subsidence claims in the past, and explains: “Quick win and low fee supply chain solutions are not the answer for long-term sustainable management of a peril such as subsidence.

“An approach that has – quite frankly – resulted in a fragmented and diluted skill set over the past 20 years. What is needed now, in the wake of climate change, is a far more collaborative, longer-term partnership approach across the whole supply chain.”

Capacity is key

Claims administrator Sedgwick states the successive summers, which result in this type of damage means it now has the capacity to handle up to five times the normal volume of claims due to the way it is using technology.

Kevin Williams, head of subsidence and valuations at Sedgwick, says: “In recent years, the use of digital technology has assisted with damage being inspected using video.

“Avoiding the need for travel reduces our carbon footprint and removes geographical coverage capacity restrictions. Additional capacity can also be achieved by using resources from across the business, strengthening the core subsidence team.

“In the 2018 subsidence surge, Sedgwick was successfully supported by colleagues from Australia in managing claims remotely facilitated by video inspections.

“Adjusters have also built supply chains to ensure capacity exists across the whole claim journey.”

Sedgwick’s steps to increase claims handling capacity are wise given that the number of warmer summers is set to increase, according to the World Meteorological Organisation.

The meteorologists predict there is a 98% chance that one of the next five years will be the warmest year on record for the globe.

As such, the shrink swell cycle is expected to be exacerbated even further with increases in ground movement causing damage to building structures.

Heikki Vesanto, manager of GIS data science and insurance at Lexis Nexis Risk Solutions, says insurers need to be aware that the scale of climate change means the areas where subsidence is occurring is starting to shift.

Vesanto says: “The number of properties in Great Britain facing subsidence issues and damage to property from shrink swell is on the rise, and subsidence-prone areas are set to double by 2050.

“Insurers need to be looking ahead at what areas will be at risk in the coming years before a surge year takes place.”

A growing problem

According to MapleSky, London and the M4 corridor are the main areas of the UK at a particular risk from subsidence. One way to reduce the risk of future surges in subsidence claims identified by insurers is for the industry to improve the resilience of property in the hardest hit areas.

Timothy Farewell, managing director at MapleSky, says better information on properties built in these areas will be required to help insurers deal with this new reality of subsidence problems.

Farewell adds: “Better information on properties, giving details on extensions, and improved subsidence models accounting for climate change, which are starting to be available, will help insurers deal with this new reality.

“Improved subsidence models would also enable insurers to share information on risk with their policyholders and could reduce the incidence of claims.”

Additional resources

Many insurers, such as Aviva, have invested in additional resources and training to ensure they can handle the inevitable rise in such specialist claims, and ensure that work to fix the damage results in a reduced risk of further claims in the future.

Jeremy Aitchison, subsidence technical specialist at Aviva, believes good communication with customers is key to achieving a positive short and long-term outcome.

Customer communication is key, and our trusted loss adjustors will stay in touch with customers at least once a month to answer any questions and check if circumstances have changed.

Aitchison says: “When a customer makes a subsidence claim, we will clearly outline the steps required to ensure that the overall stability of their home is proven before repairs are undertaken.

“Customer communication is key, and our trusted loss adjustors will stay in touch with customers at least once a month to answer any questions and check if circumstances have changed.”

Providing a guarantee on remedial works also plays a part to ensure insurers are serious about providing a long-term solution rather than a quick fix to just get the policyholder back in the property.

Aitchison adds: “Repairs to customer’s homes are undertaken to restore the structural integrity of the building as a priority. When repairs are carried out through our loss adjuster’s network of builders, they also come with a guarantee. This is in addition to ongoing policy cover to protect against any future incidences of subsidence.”

New technology has paved the way in which insurers are working with policyholders on ongoing monitoring of some homes to assess the extent of any subsidence damage and address it in the long run.

Alex Wakefield, executive adjuster at McLarens, says monitoring trends have changed with new technologies and different approaches over time.

Wakefield explains: "Simple crack-width monitoring is now generally seen as a supplementary measure, with a preference more towards accurate site level monitoring.

“The pace of change is fast however, with satellite technology now in play, which makes use of live and historic data to reduce monitoring periods and gather data far more quickly than before.”

Damage can often be rectified by stopping the cause of the subsidence, removing trees affecting the property or, in exceptional circumstances, by strengthening the existing foundations to tolerate the subsidence if it cannot be stopped. Where the damage is less severe, the cracks can often be repaired with a resin-based filler and strengthening the surrounding masonry.

Prevention is a long-term solution

However, Louise Clark, policy adviser of general insurance at the Association of British Insurers, says prevention is also key to providing a long-term solution to what is becoming the increased frequency of a summer surge in subsidence claims.

“Insurers understand that suffering subsidence can be worrying and stressful for the policyholder, and will support them through the process.

“Where appropriate, specialists will be appointed to investigate the cause of the damage and to arrange for repair work to be carried out.

“Insurers will advise customers on [the] preventative steps they can take to reduce the chances of subsidence occurring, for example, keeping an eye on any trees or large shrubs close to the house, garage or outbuildings, which can cause soils to dry out significantly, and ensuring that gutters, pipes and plumbing are well maintained to avoid leaks," Clark says. 

Given that the ground really is shifting beneath the feet of homeowners and the insurance industry each summer that we have soaring temperatures, clearly work needs to continue to have capacity to swiftly handle surges in claims and ensure suitable remedial action to stop property from sinking.