Subsidence fears set off home insurance tremors

THIS summer's drought conditions could help force a huge shake- up of home insurance premiums, as underwriters attempt to pinpoint risks, in fear of a rash of subsidence claims. Building premiums in high-risk heavy clay areas could rise to more than pounds 3,000 a year, making homes virtually impossible to sell, while other home-owners could find their premiums slashed to just pounds 50, according to one industry expert.

The dry spell should not itself cause severe subsidence problems, because of the preceding wet winter. But if it is followed by a dry winter and another dry summer, then it will be a disaster for home-owners and insurers. Minor cracks will appear in properties this year, especially in newer homes, which owners should watch and measure.

"If the present dry weather stays with us for four months, then there will be the same problems as in 1976, 1980 and 1989," says Malcolm Hollis of Reading University. "The problem is with the clay areas in the South- east of England, from the brickfields of Bedford to Southampton. You would be looking for clay becoming dry at the area below the foundations of buildings, about 2-4ft down. Summer dryness goes down to about a foot.

"The nature of the building will influence how it is affected," Professor Hollis says. "A modern home is very brittle, and will see damage. Victorian buildings can withstand a lot more. The worst thing is foliage, which accelerates the reduction in water. Trees are moving into autumn early with less water around. Trees in spring look for water far more than now, with the greatest damage from root spread."

Even so, the dry summer following a wet winter causes its own problems, with clay swelling and then shrinking, and the soil losing as much as a third of its volume. Most homes affected will sink uniformly into the soil, but some, built on the edges of differing soil structures, will crack. There is also a fear that some homes dating from the 1980s boom were built on unsuitable land, which will only now become apparent.

David Tuffin, of surveyors Tuffin, Ferraby and Taylor in London, says: "Insurers should not leap forward and underpin, which is what was done in 1976, costing insurers an arm and a leg. With some properties, particularly Victorian ones, you get movement one year, movement back the next. The watchword is to measure, photograph and monitor. It is movement which is progressive that is a real problem. If it is a 1mm crack it can be ignored; 3-5mm is no more than cosmetic; 25mm wide is a serious problem; if it is more than that, run out of the door and get clear."

Insurers report that subsidence claims so far this year are low, but in itself that means little - in bad years it has taken some months before the claims have rolled in. The weak housing market also defers the impact, with between 25 and 40 per cent of claims arising out of home buyers' surveys. Surveyors are doing a third of the amount of surveys they did in the boom.

Several insurers are experimenting with computer models developed by the British Geological Survey and by Cranfield University that could enable underwriters to predict which homes are most likely to subside. If tests go well, then from next April home-owners will begin to find premiums vary more, as insurers replace the current system of assessing risk by postcode.

Cranfield's computer analysis is being marketed by Ventech, not only to insurers but also to surveyors and individuals, who can obtain reports on individual properties for pounds 75. Director Chris Venvell says: "The next best thing is a soil sample expert at pounds 400-500. Our report could save pounds 20 a year on premiums, if the report shows a lower subsidence risk than the insurer has assessed. A house-buyer has used one of our reports to negotiate a reduction in price."

Mr Venvell predicts a dramatic widening of premiums, and insurers admit substantial increases are likely in high-risk areas. Mr Tuffin, however, suggests that claims for the computer modelling are exaggerated. "It is a fancy gizmo. You really need someone to dig a hole, otherwise you don't get much more than buying a geological survey map."

Another problem is that although shrinking and swelling of clay is the most common cause of subsidence, it can also be caused by landslip, mineworkings, heave, corrosion, and erosion, which currently cannot be detected by Ventech's model.

q Contact points: Ventech, 01789 488707; Property Underwriting Services (for soil surveys), 01424 733727; the British Geological Survey, 0115- 936 3166.