Wednesday, 26 August 2009

Setting a Premium on Insurance

Following on the varied experience of insurance companies in response to the flood, my attention has now been drawn to a curious situation with Castle Morpeth Housing and its tenants regarding insurance:

Obviously CMH insure the buildings themselves, and have arranged a good deal for contents insurance for their tenants with their insurance company.
And – ever keen to save money, they encourage their tenants to claim on contents insurance for any damage to fixtures and fittings – which is all above board under the terms of the policy.

However – where routine maintenance is behind schedule or not a priority (and my informant tells me their estate hasn’t seen any significant maintenance in the last eleven years), then the lack of maintenance can lead to more frequent damage and hence claims than might otherwise be expected.

And here’s the nub: my informant says they have had to make four claims in the past five years, and now their premium is so high (even under the CMH-negotiated scheme) that they can’t afford it – and are running the risk of having no contents insurance.

And worse – if and when CMH contractors do a bad job or accidentally damage fixtures and fittings, again CMH encourage tenants to claim on their insurance. Now normally, in such circumstances, the insurance company would make a claim against CMH, and the tenant would not lose their no claims bonus – but because they are also CMH’s insurers and get good business from them - they seem reluctant to do so, and the tenant has to cough up higher premiums.

Now it seems to me that there is a systematic problem here – CMH are quite reasonably trying to save money on their maintenance budget, but in the end it is their tenants who are having to pay out extra. CMH needs to rethink it’s policy.