Taking simple steps to avoid accidents and investing in preventative measures to mitigate risks could save UK households £5.6 billion per year in insurance costs, according to a new report by AXA Insurance (“AXA”).
The report by AXA, entitled ‘The Financial and Psychological Value of Risk Prevention’, released today, estimates that the direct financial value of risk prevention measures equates to a saving of £209 per household in the UK.
Based on calculations and research conducted by Dr Enrico Biffis, Associate Professor of Actuarial Finance at Imperial College Business School, and a poll of 2,000 UK adults, AXA’s data demonstrates the scale of how much the majority of consumers overlook the value of risk prevention. Furthermore, the report suggests that people underestimate the emotional and psychological trauma that the loss, theft or damage of prized possessions can cause.
The bulk of savings derived from reducing risk can be achieved by UK motorists, who could benefit from £4.96 billion a year from lower premiums. Buying a vehicle fitted with in-built safety systems, such as autonomous emergency braking systems, could save as much as £1.5 billion in car insurance premiums and a further £1.3 billion from a fall in insurance claims. For younger drivers, taking out ‘black box’ insurance could reduce premiums by up to 40 per cent, saving £629 per policy.
However, polling suggests that many UK drivers do not recognise the benefits of reducing risk. Almost half (44 per cent) of people said they would not be worried if their car did not have an alarm. Over-65s were the most cynical, with 73 per cent saying spending money on a car alarm would not be worthwhile. One in three (32 per cent) of 18-24 year olds agreed with them.
AXA’s report also analysed the financial value of minimising risks at home, which could save consumers £620.2 million a year in home insurance claims and premiums, not to mention the emotional trauma of having to rebuild or replace parts of your home. Good housekeeping like repairing dripping taps and keeping homes adequately heated could bring down insurance claims by up to £387 million. Simple steps like not leaving spare keys outside the house or avoiding deliveries when there is no one at home, could lead to a reduction of burglary claims of at least £200 million across the country.
More enhanced security systems, like centrally monitored intruder alarms, bring potential savings of up to 15 per cent on home insurance premiums. However, consumers are equally sceptical about these kinds of measures. 74 per cent of adults polled said spending between £5,000 and £7,000 on security would not be worthwhile and seven in ten (71 per cent) said they would not be worried about their home not having any kind of alarm system.
The older generation have the same sentiment for securing their homes with technology as they do for protecting their cars. 89 per cent of Over-65s said state of the art security systems would not be worth it, compared to 57 per cent of 18-34 year olds.
This report demonstrates clearly the value, in both financial and emotional terms, of taking simple, preventative measures. No one likes to make an insurance claim – if you have to, something has gone badly wrong. While insurers are there to pick up the pieces when the worst happens, giving people that crucial peace of mind, what is often overlooked is the emotional impact of being forced out of your home following a flood, getting in a car accident or losing a treasured possession.
In many cases these shocks are avoidable and stopping them from happening benefits both the customer and the insurer. In short, prevention is better than cure.
As our research shows, there are many ways you can prevent the worst happening and having to make a claim. The value of these measures can not only have a profound effect on people’s emotional wellbeing, but, particularly when thinking about major national initiatives such as flood defences, can have a wider economic benefit reaching into the billions.