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January 10, 2022

How did COVID-19 affect home insurance claims?

How did COVID-19 affect home insurance claims?

Let’s just start by saying: we’re not trying to convince anyone the COVID-19 pandemic is a good thing (or was, depending on when you’re reading this). It’s had a devastating impact on the lives of billions, and the full cost is yet to be written.

But there is at least one small silver lining in an otherwise pretty black cloud: it’s provided us with one of history’s greatest ever “control groups”.

In case you’re not familiar with the term: a control group is a vital part of almost any experiment or research. If you’re trying to prove that “X causes Y” (say, sunlight exposure makes you happier), you need a group that does get extra sunlight, and a group that doesn’t (the control group). That way you can demonstrate that the relationship was likely down to sunlight and not something else entirely. Without these kinds of experimental controls, you can find all kinds of spurious correlations… like how Nicholas Cage prevents helicopter crashes, or how Internet Explorer use promotes murder (you know what… actually, that one is pretty believable).

The thing is, it’s not always that easy to get a control group outside of a lab. Take climate change, for example. There’s a strong scientific consensus that climate change is real, man-made, and happening right now. But how do we test what happens if we stop emitting greenhouse gasses? Would it be enough to reverse the trend? And how could we even measure it? People aren’t about to stop commuting to work, flying off on holiday or driving to meet up with their friends.

Except, we just did.

When the pandemic first took hold in 2020, billions of people around the world just… stopped.

We stopped travelling and commuting, stopped flying off on holidays, stopped going to see friends and family, started working remotely and only going out when strictly necessary. People started showering less, not washing their clothes as often, buying fewer clothes. We changed everything, and it provided climate scientists – along with economists, zoologists, criminologists and any other ologists you can think of – with an unprecedented opportunity to measure the effect of that. (In case you’re wondering – CO2 emissions fell by about 2 billion tonnes, or 5.8% worldwide, but it wasn’t enough to alter the course of climate change). Scientists around the world dubbed this “the great inadvertent experiment” or the “great pause”.

At Locket, we’re dedicated to finding smart ways to help you protect your home and family. So what can we learn from the great pause, and how can it help you to keep the people you care about safe?

The great inadvertent insurance experiment

Insurance is all about data, so naturally, we weren’t about to miss a chance to study this for our own field of expertise – and apply our findings to helping you protect your home and family.

We’re based in the UK, so we’ve used data from the Association of British Insurers and the UK’s Office for National Statistics in this study. Specifically, we’re looking at home insurance claims and data from emergency services like the fire service and the police. We’re comparing data from 2019 with 2020, and to a lesser extent, 2021. ONS data is all freely available and sourced below. ABI data is available from the ABI, but unfortunately, behind a paywall, so we’re not allowed to replicate the source data here even though we’d like to. Some ABI data is available for free though if you’d like to conduct your own research.

It’s important to note that ABI claims data doesn’t cover the whole market (not all insurers are ABI members, and not all members report all their data), but according to our calculations it’s a sample of about 85% of the UK insurance market.

Okay: let’s jump in.

Thefts and Burglaries

By April 2020, almost half of the UK workforce were working from home (46.6%). In London, it was as high as 57%. We know burglars generally try quite hard to avoid homeowners and neighbours (the science is pretty good on this). So, you might hypothesize that burglaries would have fallen during the pandemic, in line with the increase in occupancy rates. Or would determined career criminals have adapted and carried on, in the same way as legitimate businesses? What do you predict?

Here’s what the data says:

In 2019, there were 123,000 home insurance claims as a result of burglaries.

In 2020, there were just 75,000.

That means there were ~39% less burglaries during the 2020 lockdowns (or at least, 39% less burglary-related insurance claims).

Are you surprised? Is it what you predicted – more, less? Interestingly, it’s quite a similar figure to the percentage of people newly working from home during the pandemic (although correlation doesn’t necessarily imply causation).

Another interesting insight is the average value of burglary claims. In addition to the fall in frequency, the average claim value dropped 5.3% (from £2393 to £2268). 75% of burglars say they’d flee if they thought they’d been noticed – does the increase in occupancy mean a decrease in average value of items stolen, as thieves have less time to do their work?

At odds with the 75% of burglars mentioned above is the fact burglaries reported to the police only fell by 30% during the same period. There were 511,000 attempted domestic burglaries in March 2020-2021, meaning only about 15% of those burglaries resulted in a reported insurance claim – although, remember this data doesn’t fully cover the whole insurance market. 187,000 of those burglaries resulted in a “loss”, against which our 75,000 claims represent 40%. As for the other 60%: 26.5% of Brits don’t have home insurance, so naturally they wouldn’t appear in claims statistics; non-ABI member claims make up another ~15%. The remainder, presumably, are burglaries where the homeowner decided not to claim – e.g. the value of the items stolen was less than the excess on their insurance. But this is what statisticians call a “dark metric” – unreported things are hard to measure, so we can’t say for sure.

Police figures also reveal the changing tactics of burglars during the pandemic. Day-time burglaries fell by 4%; night-time burglaries rose by 4% – again, presumably, due to work-from-home patterns removing the traditional daytime window of opportunity. Kicking down doors and breaking glass became less popular, in favour of quieter tactics like forcing locks – although pushing past when someone opened the door did rise marginally, too. Predictably, the number of incidents where someone was at home during the burglary rose – as did the number of incidents where homeowners saw the burglar in the act – but less predictably, only by 2% each.

More than half of attempted burglaries were unsuccessful. 43.6% of cases were failed attempts and in a further 19.7% there was “no loss” – meaning the burglar left empty-handed in 63.3% of cases. But again, we have a dark metric… 63.3% of burglaries that we know about were failed attempts. How many more times did a burglar abort their attempt without the homeowner even realising? We’ll never know for sure, but it’s certainly a non-zero figure.

Overall recorded crime fluctuated almost exactly in lockstep with changes in national lockdown restrictions. Lockdowns reduced burglaries, violence against strangers, homicides and vehicular offenses. Crimes involving sharp implements like knives particularly fell during lockdowns. Unfortunately, fraud and “computer misuse” offences increased by 36% during the pandemic, meaning there wasn’t a significant fall in overall crime, just in violence and robberies – particularly against strangers.

One of the main things we take away from this is that it reinforces the idea that occupancy and oversight are strong deterrents to thieves. Check out our latest home security guide for more information.

Okay… ready for fires?

House Fires and Gas Explosions

On the one hand, you might hypothesize that increased occupancy means higher chances of noticing, and successfully putting out, a fire.

On the other, the vast majority of fires are caused by cooking, particularly when drunk. An increase in meals cooked at home, plus the fact around 60% of people are drinking more during the pandemic (including 34.1% reporting regular binge-drinking) … is it a recipe for fire risk?

What do you predict?

Here’s what the data says:

In 2019, there were 19,000 home insurance claims for fires and gas explosions.

In 2020, there were 20,000. So: about a 5% increase, which could well be a statistical anomaly. The average value fell slightly, meaning the overall total value of claims was about 0.3% lower.

Data from the Fire and Rescue Services (FRS) paints a different picture, though. Dwelling fires actually fell 5% in 2020 – at least, dwelling fires that FRS were called to attend. The FRS did its own analysis on frequency of callouts vs the dates of national lockdowns, which shows a correlation (although a relatively minor one) between lockdowns and reduced house fires. The same goes for “other building fires”, meaning, for example, offices. Which is less obvious than it sounds – offices were more likely to set on fire while occupied, whereas houses were more likely to set on fire while unoccupied.

The only kind of fire to increase was “other outdoor fires” (2%), meaning events like fires in gardens, or BBQs that got out of control. That’s relatively intuitive, with so many people stuck at home and doing their best to enjoy what space they have. At one point, in the UK, social distancing rules changed to allow people to meet outside in their garden or a public park (but not in their house). We looked for a correlation between outdoor fires and these events (March to May ’21, in various locations), but it wasn’t statistically significant.

Interestingly, FRS false alarms due to “good intent” – meaning, a well-wishing neighbour or passer-by alerted the FRS, but there turned out to be no fire – were up 5%, while the number of false alarms in general fell 7%. One possible explanation is that people working from home, taking walks around their neighbourhood and so forth, were more likely to notice a “fire” and call it in. This would tie in with the trends we saw for theft and burglary.

The average time for the FRS to attend a fire fell by eight seconds, to 8 minutes 35 seconds, largely driven by the reduction in road traffic.

Overall, some interesting results. Despite an increase in root-cause factors like cooking at home and alcohol consumption, overall fire incidents decreased and Brits are seemingly more vigilant for fires in their neighbourhoods since the start of the pandemic.

Ready for water leaks?

Water leaks, AKA “escape of water”

It might surprise you to hear that “escape of water” is the number one cause of damage to UK homes – far greater than fires or burglaries. In fact, in an average year, leaks cause about the same amount of damage as all fires, explosions and burglaries combined.

So what’s your prediction for this category?

Does an increase in time spent at home equal increased wear and tear on appliances and pipework; will increased alcohol consumption lead to an uptick in accidental leak events like over-run baths?

Or, does time spent at home mean increased vigilance; a higher chance of spotting a leaking appliance when the water can simply be mopped up? Does the fact we’re washing less, washing our clothes less, actually mean our appliances are seeing less use?

What do you think?

Here’s what the data says:

In 2019, there were 226,000 claims for escape of water.

In 2020, there were 202,000 – about an 11% decrease. The average claim value fell slightly, too, so the overall value of leak claims was about 13% lower than in 2019.

The emergency services are rarely called to water leaks, so ONS data for this one is scarce.

It’s worth noting that winter 20/21 was pretty average – neither particularly cold nor warm. Whereas 19/20 saw one of the warmest winters on record, including the highest December temperature on record. In other words, it’s not unusually clement conditions driving our reduction in 20/21. Incidentally, weather-related claims in 2020 were actually very high – more than double the previous year – but largely because of record-breaking rainfall leading to widespread flooding (affecting 1,000 homes in Doncaster alone) and four named storms.

Okay, one more for fun: accidental damage.

Accidental Damage

Accidental damage (AD), in case you’re not familiar with the term in its insurance context, is “damage caused to your home or your belongings, by you or your family, but not on purpose”. Your policy may vary, but generally, standard buildings and contents insurance policies only cover damage caused by other people, or by nature. So: if a cold snap freezes your pipes, you’d usually be covered. If you accidentally drill through one while partaking in a spot of DIY, it wouldn’t be covered – unless you have AD cover. Or if you accidentally leave the bath running and cause a flood: that’s AD too, and normally not covered by regular home insurance. Other common examples are spilling red wine on your carpet, kids kicking footballs through windows, and so on.

Okay, so: people spending more time at home; potentially drinking more; working remotely from their own devices; exercising in the living room; home-schooling kids for up to a year during the height of the pandemic… What’s your prediction? Did accidental damage claims go up, or down?

Here’s what the data says:

In 2019, there were 336,000 claims for accidental damage.

In 2020… there were 336,000 claims for accidental damage! The average value increased somewhat, from £705 to £756, meaning the total value paid out for all claims did increase by about 7%, but the number of incidents remained very steady.

Interestingly, many individual insurers have reported much higher figures: Halifax reporting 11 – 35% increase depending on the window; Admiral reporting 28%, and LV reporting up to a 70% increase (AD up from 30% of all claims to 51% of all claims). Ageas claims a 30% increase in certain categories (laptops and tablets). Every insurer has their own “competitive footprint”, meaning their appetite for insuring different types and values of property. So, it’s possible that these insurers’ footprints simply exposed them to greater risk of AD – for example, they have a higher appetite for insuring people in certain professions, and those professions happened to be the ones working remotely during the pandemic. A more cynical observer might suggest that perhaps they simply overstated their AD risk to try to raise awareness, and prevent accidental damage claims in the first place! We’ll let you decide.

Some closing thoughts…

For a lot of us, it’s not been a great couple of years. We’ve been cooped up at home, missing friends and family, having our holidays cancelled, freedoms restricted (in the name of public safety, but restricted nonetheless) – and for many people, our livelihoods and personal safety directly threatened. Depression and anxiety have surged, and our overall life satisfaction, wellbeing and happiness have all declined. It’s not been that much fun, overall. 1 out of 10, would not pandemic again.

But if there is indeed a silver lining to this whole shebang, perhaps it’s this: when it comes to burglaries, violent crime, fires, or even water leaks, you are empirically safer than before. And seemingly, it’s a people-powered thing: it looks a lot like you’re safer because you, and your community, are spending more time at home and in your neighbourhoods; deterring criminals, reporting fires, generally being great human beings. So ask yourself this: does your home insurer recognise what you’re doing? Do they give you perks and discounts for taking care of your home and family? They’re saving money when you do – if they’re not passing some of those savings on to you, ask yourself why not? Or even better, ask them why not?

Or even better again – join Locket. We work with you to protect your home, instead of just passively waiting until you need a pay-out. It’s home insurance, but not as you know it.