Predicting and preparing for the increasing risk of subsidence

The Met Office outlook for global temperature suggests 2024 will be a further record-breaking year, expected to exceed 2023, which was not only the second warmest year on record for the UK, but also brought 11% more rain than average. As climate projections predict an increase in the frequency of hotter, drier summers and warmer, wetter winters property insurance providers must prepare for growing levels of subsidence claims. In fact, this growth is already happening, demonstrated by the significant increase in subsidence payouts in 2023, after the extreme heat of the previous year.

LexisNexis Risk Solutions analysis of British Geological Survey data reveals that with the current climate trajectory, 1.2 million more homes in England are at risk of subsidence issues by 2050, a 27% rise on the 4.5 million households already at subsidence risk today. Insurance providers need an enhanced awareness of the challenges that come with addressing subsidence in the coming years, as human-induced climate change continues to accelerate geological change, notably the shrink-swell cycle of clay soil.

UK equivalent of Silicon Valley faces huge rise in subsidence risk

The analysis shows those property owners at most increased risk are situated in the Oxford

and Cambridge arc, the area that spans the five counties of Oxfordshire, Northamptonshire, Buckinghamshire, Bedfordshire and Cambridgeshire. The area, which has a government backed regional partnership board to help drive investment in what is known as the UK equivalent of Silicon Valley, is expected to witness significant housing development over the next 30 years.

In places like Milton Keynes, currently at low risk, an additional 18% of households will be at risk of subsidence by 2050 based on our analysis. Swindon, meanwhile, will witness the percentage of possible or probable ‘at risk’ households increase from 20,000 properties today to 64,000 in 2050, a 219% increase.

Meanwhile, regions already facing substantial subsidence risks are anticipated to experience heightened severity. For instance, Oxford is projected to witness a 33% increase in households where subsidence is considered probable as opposed to possible.

These subsidence projections also pose a serious risk for the estimated 7 million residential properties currently without home insurance. Many of these uninsured homes are likely to belong to lower income families, highlighting a significant socio-economic issue. This situation underscores the mounting pressure on the insurance sector to do its utmost to make home insurance more affordable, especially as environmental risks continue to rise.

Insurance providers paid out £54 million in subsidence claims in 2023. With more homes being built in the UK, the projected losses from claims payouts by 2050—just 26 years from now—could be substantial.

While the insurance sector cannot change the weather, it can play a crucial role in raising awareness among homeowners, commercial property owners and insurance providers about the significant challenge of addressing subsidence in the UK in the coming years. This could include everything from educational campaigns on how to prevent subsidence, for instance, reviewing the proximity of surrounding trees and inspecting drainage, or considering what effect laying impermeable surfaces or hardstanding may have on the rainfall reaching the soil below and changing its moisture content. In addition, insurance providers could increase clarity and engagement with policyholders to help reinforce insureds’ understanding of what their property insurance policies will and will not cover as risks change.

Subsidence risk scores

Knowing exactly where subsidence risk is present is clearly essential in helping policyholders put subsidence prevention measures in place to mitigate risk to their property, and therefore help keep insurance costs down at point of quote. By using geospatial intelligence data insurance professionals can make a full, fast, and accurate assessment of perils risk at individual property level to help offer the fairest and most precise premium for the property.

Data on average or expected weather conditions, soil types, patterns of clay-rich soils, proximity to large trees, and types of ground movement enable the creation of a subsidence risk score. This score can be used in insurance pricing, offering an indication of a property’s propensity for subsidence.

Accessing this score from a single source, alongside property characteristics data such as value, age, construction, number of bedrooms and bathrooms, and roof type, enhances the ability to provide a personalised quote that accurately reflects the applicant's commercial or residential property, rather than neighbouring properties. This insight also enables insurance providers to support customers in taking control by helping them to monitor the risk of subsidence, allowing for timely remedial action to be taken.

Basements and the risk of subsidence

Basements also pose subsidence risks. New basements in particular can exacerbate subsidence risk for the building itself and those around it.  About 7,000 basements were excavated between 2008 and 2019. Structural supports constructed into deeper, denser clay means that part of the building moves less than the rest, resulting in differential subsidence. The modern basement will also be made completely waterproof, causing lakes to form underground. This occurred behind the Royal Free Hospital and was responsible for the major subsidence of St Stephen’s Church.

Until recently, insurance providers had no way of knowing if a property had a basement or lower ground floor at point of quote.  Now, solutions such as LexisNexis® Basements Indicator can confirm that a property has a basement or an underground level, at the point of quote and throughout the customer journey.  In London, our analysis shows 50% of properties have basements demonstrating the value of this knowledge for insurance providers with high concentrations of customers in the capital. 

Visualising the risk in real-time

Along with injecting perils data at the point of quote, geospatial data visualisation makes it easy for insurance providers to manage their books of business. It enables insurance providers to create a birds’ eye view of risk using data from multiple sources.  They can gain both an accumulated and granular view of a single property’s subsidence risk, or the risk for an entire area. Alternatively, by intelligently mapping where subsidence risk is present and overlaying this with customer data, they can immediately see their exposures and accumulations in close to real time to support better risk selection and pricing.

Granular claims history data for the property

Thinking more broadly, it is not only perils and property characteristics data that can help identify subsidence risk, but granular data on the past claims for a property can too.

Imagine this scenario – an individual is moving into a new home and shopping for an insurance quote. They confirm the address and the insurance provider sees, through access to industry-contributed claims data, that the property has had a claim for subsidence.  With an extended 12-year history of weather-related claims, they can see the timing cost and the circumstances of the claim to support pricing and underwriting decisions.

The insights gained from this extended history of market wide claims data will be invaluable to insurance providers at the point of quote, especially in the high-risk subsidence areas like the Oxford-Cambridge arc. It is not only set to uncover past claims for subsidence that may have occurred before the customer’s tenure, it will also help insurance providers see if a property has a risk of subsidence but has had no claims related to that risk, meaning the ability to underwrite and quote on this basis is much improved.  In time, the solution should also unveil a deeper understanding of the risk and potential cost of a subsidence claim, drawing from the claims experience in the market for specific localities.

Harnessing the power of property data

As the key parts of the UK face the increasing threat of subsidence, educating home and commercial property owners about the signs of subsidence is crucial. This will enable them to take remedial action promptly when needed, typically at a stage when repairs are less invasive and costly. Meanwhile, insurance providers who harness the power of data will help offer customers the most suitable subsidence cover for their property's risk, with the most accurate and equitable premium.

 

[i] https://www.metoffice.gov.uk/about-us/news-and-media/media-centre/weather-and-climate-news/2023/2024-first-chance-of-year-above-1.5-c-say-climate-scientists

[ii] https://www.metoffice.gov.uk/about-us/press-office/news/weather-and-climate/2023/2023-was-second-warmest-year-on-record-for-uk

[iii] https://www.metoffice.gov.uk/about-us/press-office/news/weather-and-climate/2023/2023-was-second-warmest-year-on-record-for-uk

[iv] https://www.abi.org.uk/news/news-articles/2023/9/home-insurance-payouts-up-11/

[v] This risk has been illustrated by British Geological Survey data with cutting edge analysis and expertise in data applied by LexisNexis Risk Solutions (LNRS), part of data & analytics giant RELX plc. The analysis highlights risk areas while accounting for a wide range of geological, weather and climate data.

[vi] This risk has been illustrated by British Geological Survey data with cutting edge analysis and expertise in data applied by LexisNexis Risk Solutions (LNRS), part of data & analytics giant RELX plc. The analysis highlights risk areas while accounting for a wide range of geological, weather and climate data.

[vii] https://www.oxford-cambridge-partnership.info/

[viii] https://www.confused.com/home-insurance/home-insurance-statistics

[ix] https://www.abi.org.uk/news/news-articles/2023/9/home-insurance-payouts-up-11/

[x] https://www.theguardian.com/uk-news/2021/jul/18/london-basement-extensions-now-as-normal-as-loft-conversions-study-finds

[xi] https://www.heathandhampstead.org.uk/planning/more-information/subsidence-and-basements/