Homeowners take risks this winter as home emergency cover declines

Homeowners take risks this winter as home emergency cover declines

This winter, we’re encouraging advisers to speak to their clients about home emergency cover, as our latest data suggests homeowners are increasingly opting for less thorough cover in a bid to save money. 

Take-up of home emergency cover declined in the six months from April 2023 to its lowest level since April 2020 among homeowners, indicating cost of living pressures are leading to cutbacks in protection.

We’re approaching peak time for issues occurring in the home that would typically result in home emergency claims. Paymentshield’s claims data shows that December consistently sees the highest spike in claims, with the most common type of claim relating to boiler breakdowns due to frozen pipes.

December 2022 was one of the worst months on record for claims, as a 10-day spell of arctic airmass brought some of the lowest winter temperatures the UK has ever seen. Just over 65% of all our home emergency claims in 2022 were heating or boiler related. 

The average cost of a claim was £275, with total home emergency claims from Paymentshield policyholders amounting to over £110,000 in 2022.

The trend for declining cover – while incredibly risky – is not entirely unexpected. In research we commissioned earlier this year, conducted with over 2000 UK adults in partnership with YouGov, 51% of adults said they’d be looking at their financial products more this year with a view to saving money.

And new research from Defaqto, one of the UK’s most trusted sources of financial product and market intelligence, shows that just over one in ten people have cancelled an insurance policy this year to help combat cost-of-living.

Emma Green, Distribution Director at Paymentshield, comments:

“We understand that people are trying to make savings where they can, but scrimping on cover really is a false economy. For many people, unexpectedly having to fork out hundreds of pounds of their own money in the run up to Christmas, and as heating bills rise, is simply not manageable.

“Many people will need guidance on where is a sensible place to make savings and where isn’t. Advisers are in the best position to provide that support across a portfolio of financial products, and where appropriate, share practical examples of what exposure to certain risks could look like financially.

“Naturally, consumers can expect to pay slightly more for a policy that covers them adequately for home emergencies. If advisers don’t have time or aren’t comfortable having that conversation with their client right now, they can refer it to our expert advice team who will provide the same level of care and support in getting the right outcome for the customer.”

Angela Pilley, a home insurance expert at Defaqto, adds:

“It is understandable in the current economic climate that consumers are looking to make savings where possible with some reviewing financial products and the insurance covers that they have in place. This can be risky if consumers don’t fully understand the benefits of a product or the potential consequences of removing cover. Home Emergency cover is an example of this especially as we are approaching the very unpredictable British winter.”