Axa sees huge spike in cavity wall installation claims - updated

However, Andy Williams, technical strategy manager at Axa, told Post’s Claims Club last week that claims numbers had spiked from an average of around 100, to 1800.

Operating on grants from energy companies, there was a boom industry in the retrofit installation of CWI in millions of homes in the nineties. But where systems were installed poorly or were never suitable for the property, some homes suffered damp, and legitimate claims followed.

For many years these were infrequent, said Williams, pictured. “We have always had these claims, but they have been at low levels,” he added.

“We had a small spike in 2016 which was linked to one particular policyholder and then volumes returned to normal levels again until they hit the roof in quarter three and four last year.

“Last August we had about 100 outstanding CWI claims, but by the end of the year we had 1200 and that number peaked to around 1800 at the end of quarter one this year.”

These claims fall into two camps - professional indemnity and public liability claims, with the majority falling in the latter camp, Williams added.

He explained that he had seen research of 250,000 properties (from a UK housing stock of 30 million homes) that claimed issues were found to exist with one in two. With six million homes given guarantees by the Cavity Insurance Guarantee Agency Williams estimated this meant a potential claims pot of three million.

“But I don’t want to scaremonger here, because issues don’t necessarily result in insurance claims,” he added. “Some of them will be covered by the guarantee and some of them will be excluded under the terms of the policy. But this did give us an idea of the potential scale of the overall issue.

“In theory when each property was scoped out to see if it could or should have retrofit cavity wall insulation there should have been a surveyor involved to look at the architecture, what type of property it is and whether it is suitable,” Williams continued. “But in our experience this did not happen, or if it did, it was to differing degrees and that is where the cash cow was created.”

After the event, CIGA contacted Post, with its head of communications and marketing Caroline Kuchta commenting: The survey that is being referred to was not carried out by [us] and is not valid or accurate.

“The survey and the three million referred to was put together by a drive-by thermal imaging company and the information has no technical merit and unfortunately been used by claims companies to boost business. CIGA has records of only four claims for every 1000 guarantees.”

One of the biggest issues Axa has experienced is with the quality of the submissions with many following a similar template but excluding important details such as date of installation, issues encountered and when these first arose. This has not helped when it has come to calculating average claims costs.

“The quality of these claims has been the main problem,” added Williams. “And while the traits are very similar to holiday sickness claims. What the claimant market did not appreciate is that bringing a CWI claims involved so many more technicalities, which they had not anticipated when they presented these claims.”

Williams cited one policyholder on its book had seen 900 claims brought against it, where they had not installed CWI in 40% of the properties mentioned.

Explaining Axa response, Williams commented: “Looking back the biggest thing we did was identify the issue quickly and get on top of it. And the way we went about doing that was ring fencing staff to dedicate themselves to the problem.

“We also needed to improve our data capability to give us the tools to fight these claims and intelligence has been a key part of our success here on all levels; from an industry perspective, to claimant lawyers, down to individual surveyors which we have seen named in lots of claims.

“We also took a bold and aggressive strategy early on to write to claimants directly for every claim that was presented,” Williams continued. “And we have had some interesting responses including people saying they had not had CWI installed in their home; to people who did not know a claims was being presented; to those who did know a claims was being prepared but had told the claimant not to pursue it any further when they were asked to sign a funding agreement. So there is all this information coming back which we are trying to package up and present to the Solicitors Regulation Authority.”

In terms of the claims Axa has been able to estimate accurately, Williams said the average figure was just short of £20,000, that the CWI volumes had decreased since quarter two and that it is now closing these claims at a quicker rate than it is receiving them. However, he mentioned that it was getting claims resubmitted that it had already repudiated against another policyholder - highlighting the lack of validation.

With regards cross industry engagement, Williams concluded: “We have had some contact with other insurers where we have had aligning periods of cover and been linked in with the Insurance Fraud Bureau throughout this process. But I do think that industry piece could be greater and wider.”

He suggested that this would particularly help in aggregating information to assist the IFB: “I suppose one of my frustrations is that within the Association of British Insurers there is not a liability working group through which we would be able to raise the profile of CWI and get traction with this. I know the scale of the issue from an Axa point of view, but I would be interested to get people round a table and get a broader picture.”