Insurance companies face a bill of up to pounds 500m to meet claims after the storm damage suffered in Scotland and the North of England a few weeks ago, fresh research revealed yesterday.
Up to 3.5 million people may have been affected by the storms, which led to a big freeze and power cuts in many areas.
But it was the subsequent thaw that led to massive damage from burst pipes, both to commercial premises and private households, according to the study, by Willis Faber & Dumas, the reinsurance group.
The report's findings, which classed the freeze as the third-most expensive for the industry in a generation, clash with earlier estimates by UK insurers. For some time afterwards, they insisted claims against them were likely to be minimal.
Willis Faber & Dumas said yesterday that the high bill of between pounds 300m and pounds 500m was caused by the failure of electrical supplies, which led to large numbers of burst pipe claims.
Many firms were putting in claims for business interruption with a further widespread impact on industry following water shortages caused by burst water supply pipes. Despite this problem, brewers and distillers were unaffected, the report said.
Household claims averaged between pounds 500 and pounds 1,000, with some exceptional cases of up to pounds 10,000 being reported.
On the business side, a number of commercial losses of more than pounds 750,000 each have been reported to insurers.
Willis Faber & Dumas said yesterday that the scale of claims could cost between 3 and 5 per cent of total property insurance income for the year.
Oliver Peterken, director of research at Willis Faber & Dumas, said: "We based our paper on the worst-case scenario, that there were 500,000 units damaged. But the market is starting to see commercial losses coming in which are much higher.
"The important thing is the volume of claims rather than the average cost of each claim. We estimate a bill of up to pounds 300m for households, with commercial losses thereafter.
"The thing to remember is that for a domestic customer a flood is an unpleasant event. For an industrial customer it is not just damage to property but business interruption - those can take time to come in and will be more expensive.
"I would not expect this to have an impact on premiums. This is the kind of thing insurance companies budget for."
Chris Dore, personal claims manager at Eagle Star, said: "We guessed the number of claims roughly right, but there is no doubt that the value of many claims has been rather more than we anticipated. There have been quite a lot of serious instances of damage, which in the early days we did not expect.
"It was difficult to get plumbers out initially and there was so much emergency work that our immediate reaction was to make sure the insured was okay rather than assess initial costs. The scale of claims was more serious than first assumed, but still within bounds that should not materially affect our results or lead to an increase in premiums for policyholders."Reuse content