The recent recession devastated many businesses in the UK, causing a proportion to close shop for good, leaving a large number of residential and commercial properties standing empty up and down the country. According to the Local Data Company One in three shops on the high street has now been empty for more than three years, demonstrating the scale of the problem as reported in Post Magazine. These empty buildings have caused a huge issue for the insurance industry, but why? Empty buildings are more prone to vandalism, theft and arson and are, therefore, a riskier prospect to an underwriter. Many insurers as a consequence reluctantly offer property owners limited unoccupied building insurance. Challenges can also arise when only part of a building is occupied, leading to a potentially difficult resolution should a claim arise. Agents and brokers have started to strip out unoccupied cases from portfolios but, for some underwriters, insuring the more unusual risks allows them to stand out and deliver a policy that the larger composite insurers cannot or choose not to. A recent debate with insurers that handle this type of business identified many of the issues underwriters face when dealing with cheap empty property insurance and helped create a check-list that should to be considered by consumers with the help of their brokers when presenting information to underwriters. This includes information gathering, application processing, planning permission, innovation and what the best outcome is when a loss occurs. According to this vacant property insurance article, insurers agreed that when dealing with complex risks such as unoccupied property it is vital that the broker and customer obtaining cover gathers as much information as possible in tandem.
The steady growth of online sales has meant many general insurance policies can be satisfactorily bought online. However, human intervention is still critical to understand the particular nature of a cheaper empty property insurance requirement. It may be possible to innovate online application processes for commercial property, but an allowance for easy intervention by an underwriter is critical.
This part of the market is one that has not benefited from a great deal of innovation as of writing – but changes are beginning to be made. A prime example is that technology now exists which can scan barcodes printed on properties to provide an automatic update to the property management company and insurer, showing the property has been checked and any issues identified. However, there has been little evidence of any other developments. Whilst security systems are a vital component and have improved over time, more needs to be done. The first step would be for industry and professional bodies to contribute their input to the debate.
Across any field application processing of insurance, the intention is to pay out on a policy – to not do so only furthers negative feeling towards the industry as a whole. However, with unoccupied property, the policy itself can have so many more exemptions and clauses.
Finally, it is a key responsibility of brokers and consumers to convey or ensure that all terms and conditions are thoroughly read and digested by the client in order to avoid any difficult conversations, especially if there has been an exclusion set within the policy that could affect a potential claim – often missed or excluded at the information-gathering stage.
As an industry, it is crucial to underline that the intention is always to pay out on a policy in the event of a claim, in order to build integrity and customer trust. To ensure a strong reputation, insurers need to insist on gathering the facts that affect the decision of the underwriter in setting the premium of an unoccupied property as well as forming the basis for helping expedite the pay-out of any claim that may arise in the future.
How can technology assuage some of the issues associated with cheapest unoccupied building insurance? These risks are not conventional and every case will have a unique set of circumstances that determine the pricing. Typically, a lack of information at this stage results in unattractive premium prices and it can require additional and unnecessary time and effort to retrospectively source this data. In addition, ensuring that a premium is competitive and comprehensive, providing as much information as possible has the additional benefit t of ensuring – should a claim be made – that any discussion around a potential loss can be held from an informed point of view. Today, most unoccupied property risks are priced with some key elements of information missing. Therefore, the onus is on both the broker and provider to demand as much detail as possible at the outset, even though these conversations can typically be difficult, from the insurers’ experience. Factors that should be noted as part of any initial survey prior to an insurance application include: age of property, number of storeys, type of construction including floors, planning permission, length of time unoccupied, previous occupation, new/planned occupancy renovations, inspection schedule, waste clearance, confirmation of utilities being switched off and whether or not security systems are in place and activated.
If any of the above elements are missing, the risk would likely only receive cover for fire, lightning, explosion and aircraft (FLEA). Should all of the above be provided, wider perils can be added to the schedule including riot, civil commotion, malicious damage, earthquake, storm, flood and impact. Only an all-risks policy can provide total peace of mind to all parties, but such a policy is only attainable if the underwriter is provided with a complete picture of the property.
The most common reason a commercial building remains unoccupied is down to the status of planning permission. Often a site will be purchased with the intention of redevelopment, yet securing the necessary approvals can take time and result in the building standing empty for some time. However, property companies that do not receive the appropriate permission will likely move on, leaving a property vacant for an extended period of time and thus increase the likelihood of the premises suffering from malicious damage, flooding or other perils. Residential properties normally require cheap probate insurance for a period pending sale or re-let therefore some policies can be converted from unoccupied to cheap landlords insurance without penalty