James O’Hara is commercial director at Ceta Insurance
Finding the right cover for non-standard residential buildings insurance can play a vital role in the application
We live in a non-standard world currently. Nothing feels certain or predictable and that goes for financial services too. Covid and cladding and historic economic downturns make the mortgage market outlook also unsure.
In residential property, the term non-standard usually refers to an application that includes something deemed higher risk than the standard. This could mean the property is unusual (thatched roof), faces a risk (flooding) or the applicant is deemed a risk, which could be a previous conviction or a job deemed risky.
Normally when non-standard insurance hits the headlines it usually involves someone or something famous, most likely a celebrity. David Beckham’s legs, while playing for Manchester United and England, were reportedly insured for $100M, Jennifer Lopez’ famous bottom was valued at $27M and Tom Jones chest hair was covered for a much smaller yet still eye-watering $7m.
Even the Loch Ness monster has been risk-assessed. In 1971, Scottish whisky company, Cutty Sark, offered a £1 million prize to whoever could capture the mythical monster but hedged themselves by reportedly insuring the competition in the event that they had to pay out – an outcome that seems even more unlikely than Mr Jones, Ms Lopez and Becks losing the tools of their trade.
Yet even these figures are small compared to the non-standard household insurance market in the UK, which is estimated to be worth in excess of £1.5 billion and accounts for nine million properties, around 30% of the market.
For a mortgage adviser, a non-standard property purchase that isn’t insured can present a problem to completing the mortgage. So having a ready-made solution already in place can be crucial.
We recently handled a case where the mortgage lender wanted to see evidence of building insurance. When the mortgage broker tried to find an insurer, the flood risk was deemed high and, although they found cover, the client deemed it too expensive and pulled out. Fortunately, we were able to find a significantly lower premium and excess for the broker and the application proceeded and completed.
We see cases of this nature regularly and, while the mortgage is the most important thing, it is not the only area where the broker can add value and turn a one-off transaction into a client for life. For brokers, arranging cover in these areas can involve a lot of phone calls to different insurers, picking the cheapest and hoping for the best. Often brokers just might not bother at all.
But the non-standard market is large and brokers should have a ready-to-use system in place for when a non-standard property application crops up, which it will.
We see properties like barn conversions that are listed as non-standard with a 95% quotability rate with average premiums under £500. Holiday lets, likely to increase in popularity in the UK while foreign travel is restricted, can be quoted on over 90% of the time.
Arranging non-standard insurance doesn’t need to be time-consumer or expensive for a broker and a mortgage application should never be held up by a problem finding cover.