Hot, dry summer could make 2022 a subsidence year

Authored by Heikki Vesanto, Manager GIS Data Science, Insurance, UK & Ireland, LexisNexis Risk Solutions

The UK is set for another heatwave and large parts of the country are now facing hosepipe bans.  July 2022 was the driest July for England since 1935, and the driest July on record for East Anglia, southeast and southern England.  July 2022 also went down in UK climate history as the first time the UK exceeded temperatures of 40°C. For property insurance providers, this prolonged spell of hot, dry weather is a major cause of concern, not only due to increased fire risks but an expected rise in subsidence claims.

All the major weather models are predicting a change in weather patterns across the UK as a result of climate change and these changes will drive an increase of subsidence risk. Drier summers with increased drought, and a wetter winter were the conditions seen in 2018 that caused a 400% increase in subsidence claims. Now experts warn that the number of properties in Great Britain facing subsidence issues and damage to property from shrink-swell is on the rise, with figures of just 3 per cent in 1990 likely to reach 10 per cent by 2070.

It is feared that increased seasonal rainfall, coupled with drier and warmer summers will extend the impact of subsidence into regions where it is currently not a risk. Regions that are already at risk will also see increases. For example, in London where currently around 20% properties are currently at risk of subsidence, the amount of properties at risk is projected to increase to over 50%.

The shrink swell cycle that gives rise to subsidence is driven by the swelling of clay rich soils in the wetter winter months and the drying during the warmer and drier summer. This shrink swell is exacerbated by warmer summers and increases the ground movement causing damage to building structures.

The physical and systemic effects from extreme weather have emerged faster than many expected and generally, they have been underestimated. Insurers could be exposing themselves to increased losses if they fail to gain a complete picture of property risk. 

As well as using data enrichment at the point of quote to understand subsidence risk for a particular property, data mapping has emerged in recent years as a valuable tool to enable insurers and those working in the property market to achieve a detailed view of risk for one property or a whole book of business. 

Geospatial data visualisation solutions such as LexisNexis® Map View enable insurance providers to aggregate data from multiple sources to gain both an accumulated and granular view of property risk, and intelligently map this data to support risk selection and pricing of exposures. Data on the average or expected weather conditions, coupled with soil type, the pattern of clay rich soils, the proximity of large trees and types of ground movement enable a risk score to be created which can be used in insurance pricing, providing an indication of a property’s propensity to subsidence.

Along with perils data, insurance providers can view granular data on the property characteristics and soon, past claims related to the property will be accessible to the market through the first market wide contributory claims database – LexisNexis® Precision Claims.  This will allow insurance providers access to home and motor claims data for a person, a property and a vehicle including the type of claim, the circumstances and the settlement. This insight will be hugely valuable to insurance providers at the point of quote, uncovering past claims for subsidence that may even have occurred before the customer’s tenure. Alternatively, if they know a property has a risk of subsidence but can also see it has had no claims related to that risk, the ability to underwrite and quote on this basis is much improved.

Insurance providers can also use the intelligence to advise customers on the actions they could take to mitigate the risk, for example removing trees that could exacerbate the problem.

Understanding the risk of a subsidence claim using a combination of data on the perils, the place, the property, past claims and the policyholder puts insurance providers in a far more powerful position to provide an accurate and fair premium to the policyholder and protect insurance providers from unexpected losses. 

Data is the insurance sector’s ally in helping to more accurately predict subsidence risk.