By Rik Temmink, Chief Product Officer, geo
Leaks and escape of water incidents in homes are so prevalent in the UK that last year, the head of the General Insurance Policy at the Association of British Insurers called for the problem to be addressed as a number one priority for the domestic property insurance market. Given that claims for escape of water rose by 24% between 2014 and 2016 and that the average value of claims is also rising, this is hardly a surprise.
The extreme weather that we have experienced in recent years, particularly during the ‘Beast from the East’ and Storm Emma last year serves to intensify what is already a major headache for insurers. Following these weather incidents, £194 million was paid to restore the damage caused by burst pipes – the highest amount ever paid by insurers in one quarter.
Whilst research and analysis into the reasons for the increase in escape of water claims and claim values has helped insurers gain a better understanding of the risk factors, it is still an uphill struggle to encourage householders to adopt preventative measures.
Expensive homes, high claims
Claim values are rising because Britain’s homeowners are investing more in expensive fixtures and fittings. The cost of damage and repair to fully-tiled wet rooms, underfloor heating and high-spec shower and bath ‘furniture’ is far greater now than even ten or twenty years ago. In addition, modern plastic pipes and push-fit fittings are arguably less effective than more traditional copper pipes. When it comes to the rising number of claims, this is likely to be due to the growth in multiple property ownership, with many residences being used as second homes which are often left empty for long periods of time. The risk of frozen or burst pipes, particularly in the cold winter months, is greater, as is the amount of damage that can be caused before the problem is resolved.
Increasingly, however, the insurance industry is introducing a new initiative that will help to prevent escape of water and alert homeowners if an incident does occur. Even better, they will reduce the cost of premiums to incentivise home insurance policy holders if they get involved.
Insurers are partnering with select providers of smart solutions that have been designed to detect leaks and shut off water systems. Our own solution, Waterlock, uses a remote controlled stopcock attached to the mains water supply. Sensors placed around the home will detect standing water or an increase in humidity, automatically activate the valve controller to close the stopcock and send an alert to the homeowner via email or a mobile phone app.
According to a Water Security Survey conducted by The Consumer View in 2017, “only 18% of UK consumers close the mains pipe and the inflow to the washing machine before they go away”. The main reason for this is that stopcocks are out of sight and therefore out of mind, Stopcocks also tend to be in places that are hard to access, and as many as 60% of stopcocks are either require fully seized or extremely hard to turn. Not only can solutions like Waterlock automatically turn off the stopcock, they also allow it to be done quickly, simply and even remotely by the homeowner.
The use of a smart water controller will help to reduce potential damage to a property if there is an escape of water and by preventing a leak, the homeowner is likely to suffer less disruption too. The added benefit is that they will enjoy lower home insurance premiums once they have installed the device. For insurers, the benefit is in a reduction in the number of claims and a lowering of the value of claims because water loss is minimised.
Protecting vulnerable unoccupied properties
Second home owners are an obvious early market for this type of preventative solution. Apart from being left unattended for months at a time putting them at greater risk, these properties attract higher premiums than regular home insurance policies – £800 to £1000 per year instead of approximately £300 and this is a straightforward route to reducing that cost. Households that have previously made escape of water claims are another target. According to a 2017 study from The Consumer View, 54% of households have suffered at least one water damage incident, and insurers understandably regard these as a higher risk.
When insurers and brokers are talking to customers about the benefits of taking preventative measures by using smart solutions, it is not just the cost of repairs that have to be taken into consideration. In a recent case, over a hundred students were forced to move into temporary accommodation when a large leak in a top floor apartment went undetected for days, resulting in a major flood of the building. The financial implications for repairing the damage and housing the students were one issue, but this incident occurred during a busy exam period, so disruption to the students’ lives was also a factor.
Unless measures are taken now to arrest leaks and prevent escape of water incidents, the number and value of claims will continue to rise. The availability of policies that reward homeowners for installing smart water detection solutions will help to address this difficult issue. It is estimated that using these systems could reduce insurance premiums for householders by as much as 15% and for insurers will result in savings amounting to hundreds of millions of pounds every year.
THE END OF YEAR TAX CHECKS THAT COULD SAVE YOU THOUSANDS
Charlie Reading, Founder and MD of Efficient Portfolio
After HMRC’s tax return deadline at the end of January, it can be tempting to drop your guard, believing that your new tax bill is a long way away.
It’s true, you’ve got a whole year until the next bill is due. What most don’t consider, however, is that there is a range of checks that you can do reduce that bill significantly.
Astute investors make use of their tax-free allowances every year and save thousands of pounds in the process. With such massive savings on the line, it’s a strategy to certainly consider.
With that, here are some easy checks and tips from Charlie Reading, Founder and Managing Director of Efficient Portfolio chartered financial planners, that could start you on your way to a much leaner tax bill:
1. Maximise Your ISA Allowances
Good returns, flexibility, diversity and tax efficiency should be key components in your financial strategy, and the ISA helps to deliver all of these. Historically, ISAs have been at the cornerstone of tax-efficient saving and are often referred to as one of the essential steps in your strategy, as they can help your wealth grow without you being penalised by heavy tax charges. They are an incredibly useful way of saving, and, as such, it is generally encouraged that people take advantage of their benefits. However, the ISA allowance is offered on a ‘use it or lose it’ basis, so if you fail to maximise it, you can’t make up the funds later on.
Up until 5th April 2020, you can contribute up to £20,000 into an ISA, and a further £20,000 from 6th April 2020, thereby sheltering up to £40,000 per person, as long as you’re over 18.
2. Top Up Your Pension While You Still Can
At the time of writing, the highest level of State Pension you can receive is £129.20 a week, which is frankly a paltry sum to live on. That’s why saving for the future is so important. It might seem wise to enjoy life now and worry about retirement later, but you’d only be damaging your future quality of life.
Pensions are a highly tax-efficient way of saving and now offer a great deal of flexibility in retirement, as when you retire you can gain access to 25% of your pension pot as a tax-free lump sum, with the remainder taxed at your marginal rate.
The current pension annual allowance is set at £40,000, so if saving for your future is a priority, it is worth investigating which pension is right for you, sooner rather than later.
3. Protect Your Estate from Tax
Inheritance Tax (IHT) is a concern for people from all walks of life. If you are hoping to leave a legacy to your loved ones, the last thing you would want is for that legacy to be taxed at 40% and lost to the Government.
One simple way of combatting this is to consider using your annual IHT allowance. During your life, you are allowed to give away £3,000 per year without incurring any IHT charges upon your death. There are of course downsides to this, in that you lose all access and control over the money, but it may be a tax-efficient strategy to consider.
4. Don’t Overpay Your Capital Gains Tax
The final tax consideration at this time of year is Capital Gains Tax, which is also given on a ‘use it or lose it’ basis and is currently set at £12,000. The issue of Capital Gains Tax is most acute if you hold investments which have grown above your tax-free allowance.
To ensure you make the most of your Capital Gains Allowance, it is generally recommended to sell down a portion of your portfolio to realise the growth made, but only enough to maximise your allowance, is the most prudent strategy.
These funds can then be used to fund any outstanding allowance on your ISA, for example. The advantage of doing so is that by placing your money from a taxable to non-taxable environment you have the potential for further growth, and you benefit in the longer term by potentially reducing a future bill.
There’s plenty of time left before the taxman comes knocking once again, but there’s no better time than the present to start looking into how you can save you and your business thousands of pounds simply through tax allowances you might not have previously been aware of.
HOW TECHNOLOGY IS FUTUREPROOFING STOCK MARKET TRADING
Tony Shaw, Executive Director, London Office and Head Sales UK & Ireland at the Swiss Stock Exchange
Markets are shifting, there’s no doubt. Amid all the disruption and volatility from the past year, the Swiss Stock Exchange asked traders about what they expected in 2020 and beyond in our industry survey. The findings point to a rise in digital to help traders content with external forces.
First and foremost, traders are enthusiastic about what digital assets can offer.
Two thirds of traders polled said they’d had a marked rise in interest from their clients for digital assets and crypto-products. Given the interest, traders are increasingly bullish about the potential of these products – so much so that 80% have predicted an increase in overall demand in the long term. Market users believe these assets will help generate cost synergies and streamlining trading and settlement processes by creating efficiencies and ultimately reducing costs.
Our 2019 results reflect what traders have told us when it comes to digital assets and products. Last year, we saw significantly higher trading volumes from products with crypto currencies as underlyings. Overall volumes grew by +8.5% over 2018, but the increase in crypto products alone was +17%, reaching CHF 518.2 million ($534.54 m). There was a year-on-year increase in the number of transactions, as well (+21%): 19,636 trades in total.
The potential digital assets hold is clear – evidenced by the building of the SIX Digital Exchange (SDX), a fully integrated issuance, trading, settlement and custody infrastructure for digital assets.
According to traders, artificial intelligence (AI) is expected to bring further benefits to market operations.
Two thirds of our survey respondents anticipate AI will create more opportunities for the traditional equities business, while a similar number expect it to reduce the cost of trading. Innovation in AI is already – and will continue to be – a key driver in making our industry more effective at withstanding future risks and challenges both within and beyond the market itself.
In Europe, there is growing momentum behind calls for shorter trading hours – this trend was reflected in our survey as well.
Industry groups such as the Investment Association are advocating for stock market trading hours to be cut from 8.5 to 6.5 hours to open the industry to working parents and women who cannot commit to such long workdays. We found traders were largely supportive of this, with many saying that it could even facilitate operational benefits. The roll of AI is clear here in improving efficiency while minimising time wastage: 36% of traders said the introduction of shorter trading hours would prompt greater market liquidity.
Beyond the market itself, geopolitics continue to shape wider market sentiment.
It comes as no surprise that four fifths of traders said their strategies have been – to some extent – influenced by Donald Trump’s tweets. Interestingly, only 39% of those polled viewed Brexit as an influencing factor in trading activity, while three quarters believe the US election will drive trading activity in 2020 and 65% acknowledged trade wars would also have an impact.
More broadly, traders are split on the state of the global economy – 58% are bracing for a global recession while 42% predict stable macro-economic conditions over the next three years. What seems clear is that whatever happens in the wider economy, traders are making headway with new technologies that can improve their strategy, efficiency, and overall market health.
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