Paradise found?

Sometimes it seems as if everyone you speak to either has a home in the sun or is looking for one. Booming house prices in the UK have helped fuel a massive expansion in ownership of second, third and even fourth homes abroad. Some buyers who have struggled to get on the housing ladder in the UK have even decided to buy their first home overseas, reasoning that a stake in property somewhere is better then none at all.

Whatever the buyer’s motivation, all these properties require insurance. This is a market that many UK brokers are only slowly waking up to. Laurent Schonbach, Overseas Product Manager at Hiscox, says: “I believe that less than 5 per cent of those who own overseas homes insure through a UK broker and insurer.”

Buyers often don’t realise that they can insure through the UK market. Bev Reardon, Overseas Property Insurance Manager at Underwood Insurance Services in Newport, South Wales, says: “There’s a lot of misinformation. Sometimes buyers are told by developers or lenders that they have to insure locally.”

It is difficult to get exact numbers on overseas property ownership. The most recent figures from the Office of National Statistics say that just over 256,000 Brits own property abroad. However, this figure is probably too low because it relies on owners telling the UK government about their investments abroad.

More encouraging for brokers are recent studies from Mintel, which puts the figure at 800,000, and from Datamonitor, which suggests that an astounding two million Brits own second homes abroad. The latter also claims that we purchase about 100,000 new homes abroad each year. Whatever the figure, it’s clear that overseas ownership has rocketed in the past decade and shows no signs of slowing down.

The home advantage
There are some obvious benefits to insuring an overseas property through a UK broker and insurer. Policy documentation will be in English, with far less room for misunderstanding. Claims will also be handled in English. More importantly, the breadth and depth of cover available is often far better. Many of the features that clients take for granted in a UK household insurance policy are not standard abroad.

Accidental damage, for example, is frequently not included on policies sold outside the UK. Also, each nation has its own peculiarities. In Spain, for example, a government-backed insurance pool covers natural perils such as storms and floods, but claims are often reduced because of the application of average or wear and tear.

Bev says: “Rising prices in France and Spain have driven buyers further afield, to locations such as Bulgaria, Romania and Slovakia. Insurance in these countries is often far inferior to the cover that you can buy in the UK.”

She cites the example of policies in Bulgaria, which can have public liability limits as low as E5,000. “We’ve seen cases where people insure with a Bulgarian company and then find that lettings agencies won’t handle the property because the public liability isn’t up to scratch.”

Laurent, who owns property in France himself, has found service levels overseas to be low: “In France, if you insure with a local company, all you get at renewal is a bill. There is no explanation of sums insured or what is covered.”

Fair play
Overseas property is one area where FSA regulation has been a benefit. Annette McEvoy, a specialist on overseas property with broker Dickson Insurance in Watford, says: “It is a clear selling point for a UK broker to be able to say you are dealing with regulated businesses and have the Financial Ombudsman behind you in the event of a dispute.”

A smart option is to use the same insurer for both the UK residence and home abroad. Using a single insurer reduces the scope for disputes over who insures what, especially in relation to possessions or contents, which might move between homes.

Laurent is convinced that this is a market under-exploited by brokers. He says: “You get leaflets for motor insurance through your door almost every week, but when did you last see one promoting overseas property cover?”

Some innovative brokers are forging links with overseas estate agents and property developers to produce new leads.

Word of mouth is also important in this market. Buyers often meet up with other owners on their holidays and compare notes. As Annette says: “We had a client last year who was struggling to insure a new apartment in Bulgaria. We arranged cover for him and gradually word has gone round; we’ve picked up several more properties in the same development.”

The profile of buyers overseas – generally older and wealthier than average – also matches the target markets of many personal lines brokers. Helping a new client arrange decent cover for their new villa in Portugal can remind buyers of the value of a good broker.

“Personal service through a broker should be a way to win more business,” says Bev. “We feel it is easier to sell cover in the UK after we’ve sold someone insurance overseas.”

What does Hiscox offer?
Hiscox Overseas Home Insurance is one of the farthest-reaching policies of its kind – we offer comprehensive cover in more countries than any other UK insurer. We can also insure expatriates or even foreign nationals, and we even have a specific wording for high net worth properties abroad. Plus, our knowledge of local markets, including taxation, licensing and marketing regulations, means that there will be no surprises for you or your clients.

To learn more about the Hiscox Overseas Holiday Home Policy, please contact your Hiscox underwriter

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