Insurance Payouts Hit Seven-Year High Due to Climate Crisis, Warns Industry
The UK's leading insurance companies have reported that the climate crisis has significantly contributed to a surge in insurance payouts, marking the highest level in seven years. This increase follows a sharp rise in damages to homes and businesses caused by extreme weather events.
According to data from the Association of British Insurers (ABI), payouts in the three months leading up to the end of June reached £1.4 billion. This represents a 5% increase compared to the first quarter of the year and the highest quarterly figure since data collection began in 2017.
The ABI attributed this rise mainly to a spike in weather-related claims, with £144 million paid out for damages to UK homes caused by storms, heavy rainfall, and frozen pipes.
The insurance industry is urging the government to take stronger action to mitigate the country's vulnerability to climate change, as weather-related claims have exceeded £100 million for five consecutive quarters.
The UK experienced significant rainfall and adverse weather in the first half of the year, negatively impacting the economy by discouraging consumer spending on the high street. This period included four named storms since January and the wettest spring recorded since 1986.
Globally, extreme weather events have become more severe and frequent in recent years, costing insurers billions and weakening the global economy's resilience. In a recent example, Hurricane Beryl ravaged the Caribbean and the southern United States, resulting in billions of dollars in damages to communities and insurers.
Louise Clark, a policy adviser at the ABI, emphasized the severe impact of extreme weather on people and their homes, advocating for reforms in the planning system to prioritize prevention and resilience measures against global warming effects.
She stated, "Immediate government action to address surface-water flooding and maintain flood defense investments will help reduce future flood damage."
Last year, UK insurers paid out a record £573 million in weather-related claims, an increase of £150 million compared to 2022. The average payout for weather-related incidents in 2023 was nearly £5,000, up from just over £3,000 the previous year.
This year, total payouts are expected to surpass last year's total of £4.9 billion, with over £2.7 billion already disbursed. The average annual home insurance cost has also risen to £396, a 6% increase from the first quarter.
Clark added, "Home insurance continues to be crucial in helping customers during challenging times. Despite rising costs, insurers remain committed to offering competitive coverage and supporting their clients through the claims process."