WHY FLEXIBLE HOUSING WILL NEED FLEXIBLE INSURANCE - 31/01/2017

It comes as little surprise that prefab housing is making a comeback in Britain. The nation’s housing shortage is one of its most pressing problems, and the prefab may offer part of the solution. In fact, the government has set a target of building hundreds of thousands of new homes over the next few years, and it wants a large percentage of them to be prefabs.

The last prefab boom was after the Second World War. Back then the prefab hut was the answer for the many families who had been bombed out of their traditional homes. Prefab dwellings could be built anywhere, quickly and cheaply. Perhaps too cheaply, as they soon became a byword for poor quality. Amazingly, some of these prefabricated homes still exist today. 

The technology has come on in leaps and bounds with modern-day prefab homes. The design is computerised, the materials are advanced and the overall quality is high. They lead the way in energy efficiency and sustainability. In fact, they are so much better than their predecessors, they are now more usually known as ‘pre-manufactured’ or ‘modular’.

Whatever we call them, they will become more of a feature over the coming years. But they will also present a problem or two, not least for insurers and their products to cover these new prefabs.

To begin with, the construction cost of such homes tends to be a lot lower than standard brick-built houses. Let’s say a prefab home the size of a three-bedroom semi-detached costs £50,000 to design, build and finish, and retails for around £85,000. A similar house built with bricks on a similar plot would cost more than twice as much. 

In this way the prefab takes us into a new age of housebuilding. Insurers will have to keep up. They will have to commit to providing products that offer plenty of choice and are more than ever tailored to the property, belongings and lifestyle of the consumer. Those insurers that provide a ‘one size fits all’ approach will now face difficulties as prefabricated homes become more popular.

So while standard buildings cover may offer a limit of £500,000 for a rebuild, this is potentially far too much for the new generation of prefabs. On the other hand, the content cover is likely to be unaffected. It may even need to increase as the new homeowners acquire more possessions. The definition of ‘contents’ is also becoming more fluid. So a policy will need to cover the devices that increasingly keep people connected while they are away from their homes. And in the event of claim, the conditions might have to be different. For example, should the no claims discount be split into sections of cover?

Traditional contents and building policies may no longer be suitable. Instead, homeowners will want products that offer them the flexibility their new homes embody. Some products will no doubt cope. But as the nation finds more modern ways of solving the housing shortage, home insurance will also have to be as dynamic, sturdy and forward-looking as the houses they cover. The coming months and years will present an interesting challenge to insurers of how they meet the needs of this ever-increasing way of living.