“ As a result , the risk of climate change on a particular property is borne predominantly by the policyholder , not the insurer , outside of the current policy year ,” says Martin .
“ Certainly , the conversation needs to shift to risk mitigation , and insurers should encourage consumers to mitigate these risks , but there is also a growing demand for insurers to offer more certainty with multi-year insurance . It ’ s a concept well understood and catered for in life insurance , for example .”
“ A ‘ level term insurance ’ is normally a level premium paid over a term for a fixed / level sum insured . What that means is that if a 40-year-old takes out a 40-year level term policy , they have certainty of the premiums for the duration of the policy . At the start , the annual premium will be more than the cost of the underlying risk for the first year , but when the policyholder is 79 years old and in the last policy year , they will still pay the same annual premium they locked into at the start , which is lower than the actual risk ,” says Martin .
“ What we are observing with climate change is an increasing demand for homeowners to pay a level premium for multi-year coverage as well as certainty over the premiums , even though that certainty would mean the initial premiums charged would be higher than the current level , as it would be calculated based on the average expected premium over the term .