Block Insurance: How do we manage and allocate premiums etc?

Each year, we consult with our brokers (Marsh), in advance of our renewal date of 28^th May, to ensure we secure the best deal for our customers. The best deal is, of course, a combination of cost, level of cover and quality/speed of claims response. In recent years, we have secured our policy with the insurer Allianz who have been able to offer each key requirement noted above.

When quoting for portfolio insurance products, our brokers/insurers follow standard industry practice by providing one quotation for the whole portfolio. Their resultant quotation is calculated by considering the total declared value (or sum insured) of the whole portfolio and assessing the recent claims history. Each development is allocated an insurance ‘rate’ which is set by our broker, at the outset of our management of the development. The development rate takes into account various risk factors such as postcode, flood plains and claims experience of the development and is reviewed each year by us and our broker.

This standard method allows our customers to enjoy the benefits of collective buying power in the insurance market without being negatively affected by higher claims in another development.

For example, here is a hypothetical table showing the breakdown of the insurer’s annual premium of 12,217.74.

In this hypothetical situation, let’s assume that, during the year, Development 5 had a significant number of high value claims and developments 1 – 4 had only low-level claims.

Because of the combined high claims value, our insurers increased our overall renewal premium for the following year by 2.2% where, had the overall claims been lower, a generic increase of 2% would have been applied.

The following table shows how the premiums may be allocated for the following year. (For the purpose of simplicity, we will assume here, that there is no index linked increase in the sum insured).

In this table, the overall premium has increase by 2.2% but the developments that suffered minor losses have had their rates altered to include a generic increase of only 2%. Development 5, on the other hand, has had its rate increase by a higher percentage to cover the additional premium costs.

By calculating individual development premiums in this way, our customers benefit from a value lead individual block policy whilst ensuring that there is no penalty for high claims elsewhere in the portfolio. After the premium calculations have been completed at renewal, insurance premium tax (IPT) currently at 12% must be added to each premium.

In addition to this, our brokers set the excess levels for each development. These tend to be fairly consistent but where we have developments with high levels of ‘escape of water between properties’ for example, excesses may be increased to ensure claims remain at a manageable level and to encourage good maintenance of individual apartments. This, in turn, helps to maintain attractive premium levels in forthcoming renewals.

If you’d like to find out more about Block Insurance, do not hesitate to contact any one of our offices.