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Plugging the leaks – Part 3

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Tuesday 3rd April 2018 | By ma-admin

Plugging the leaks – Part 3


In Part 1 we analysed our data to explain the reasons for the increase in EOW claim values over the last 5 years. Our findings challenged some of the assumptions made by the property insurance industry.

Our data tells us that reinstatement costs have generally increased in line with inflation and that the significant increases in claim costs are occurring in bathrooms and kitchens. These cost increases are due to flooring and tiling in both rooms and plastering in bathrooms and joinery in kitchens because of:

  • Higher quality fixtures, furnishings and interiors, as well as open-plan living, with seamless and more expensive room to room flooring.
  • Contributions towards matching items authorised by insurers even when customers do not have matching items clauses in their policies.
  • Increased severity of bathroom EOW claims as bathrooms are now predominantly on the first floor meaning the extent of the damage can spread to the floors below.

By understanding the breakdown of the increasing costs, insurers can change their approach to claims management and underwriting, to help reduce the overall claim cost. For example in many EOW claims specialist drying companies are not needed and the claim durations and values can be reduced through the use of a suitable remedial scheme. An understanding of how many bathrooms there are in a house and where they are positioned, can help underwriters assess risk and price a policy more effectively.

Part 2 looked at the source and severity of leaks. Our data showed that the main cause of leaks in both rooms is pipes because for both frequency and severity pipes rank high in our data. Pipes and WCs are the largest cause of indemnity spend on bathroom EOW claims.  In the kitchen it is pipes and washing machines.

Our findings raise some interesting questions for underwriters such as:

  • Should they be asking if a property has been recently renovated in order to identify the risk of modern plumbing failures?
  • For older properties, corroding pipes are an issue and a lack of renovation could be creating a risk.
  • WCs and bathrooms on first floors carry a higher risk of causing severe damage than WCs and bathrooms on the ground floor.
  • Older washing machines clearly carry an underwriting risk.
  • Lifestyles affect risk – for example people who are away from home a lot have more severe EOW claims as they are not around to notice the leak quickly. This is particularly important in winter when water tanks in lofts can freeze and crack and cause extensive damage in an unoccupied home.

In both parts we identified matching items as a significant cause of increasing EOW indemnity costs. Agreeing to contributions for matching items such as tiles and kitchen units is making a significant contribution towards the rising EOW indemnity costs. Insurers need to decide whether to apply the terms of their policies or accept that EOW claim costs will continue to rise in order to keep customers happy.

In this Part 3 we look at the different commercial models that our insurance clients use to see how they affect EOW claims. We look at pricing models, schedules of rates and the triaging of claims to identify factors that are causing the increases in EOW claim values.

We have data on over £200 million worth of EOW reinstatement claims, ranging from £1,000 to £150,000 in size. Our data is based on the work we have done for several of our clients across different commercial models and includes different schedules of rates and pre-scoped and BRN scoped claims. We work for many different clients and take instructions from surveyors, loss adjusters and directly from insurers.

Different models

We work for many different clients who all have a different approach to managing supply chains and pricing scopes of works. Some use their own in-house schedules of rates, while others use the MA Assist independent National Schedule of Rates (NSR). Some have surveyor-led models with pre-scoped claims, while others use a loss adjuster led model or instruct MA Assist directly. Where an insurer instructs MA Assist directly and uses the NSR, we refer to this as the “MA Assist model”. So our data comprehensively covers many different types of commercial model.

In previous opinion pieces we have talked about the impact of different models and schedules of rates and how they affect claim outcomes and values. You can read them on our website:

Our clients can be divided into three broad categories and we have anonymised the data accordingly. “S” clients use the pre-scoped surveyor-led model with a schedule of rates set by the insurer. “L” clients use a loss adjuster led model with a schedule of rates set by the insurer. “NSR” clients use the MA Assist model (NSR rates and instruct MA Assist directly).

Note that we have used consistent data and have excluded large loss claims that would always be managed by a loss adjuster.

Average claim values

The table below shows the relative average claims value for each client in relation to the overall average EOW claim value. The overall average is the benchmark at 100. Those clients who use the NSR have average claim values that are at or below the average claim value. The loss adjuster led claims have higher than average claim values.

Average claim values for EOW claims

This data suggests that surveyor led models and the MA Assist model create the best EOW indemnity spend outcomes. This is almost certainly due to the strong validation processes carried out by surveyors and MA Assist. The surveyor led claims have cost outcomes that are similar to the NSR based claims, but the claim outcomes and customer experience are quite different.


The table below shows the relative average variations per claim for each client in relation to the overall average variations per claim. The overall average is the benchmark at 100. Those clients who use the NSR and instruct MA Assist directly consistently see fewer variations per claim than other clients. The loss adjuster led claims consistently see more variations per claim than the other claims.

Average variations for EOW claims

One of the reasons for the NSR claims having fewer variations is how the rates have been designed. The NSR was developed by an independent body of experts (National Schedule of Rates Management) specifically for the type of work that our contractors do on insurance reinstatement works. The NSR is a useable and clearly defined schedule of rates that:

  • reduces the number of provisional sum items in scopes,
  • is aligned to current practices and rates,
  • ensures consistent scoping and accuracy,
  • has a comprehensive pre-amble and supporting documentation.

The NSR provides clarity to all parties in understanding what is and is not included within the schedule of rates. It also provides best practice on how to scope insurance claims and what information is required to validate an insurance claim.  As a result, contractors can quickly and accurately prepare a comprehensive scope of works that covers all of the predictable costs on a claim.

The NSR ensures that the scheduled line items account for 80% of spend (volume and value) so there is no need for high levels of provisional sums and later variations. The rates are fair and straightforward.

One other point to consider is that it is in a contractor’s best interests to get a full scope prepared accurately the first time. A contractor wants to get approval in full for all the works he needs to do so he can go on site and get the job done quickly and profitably, first time. Waiting for variations creates delays in a claim and presents costly operational issues for contractors.

Pre-scoped claims almost always involve variations as the contractor identifies missing costs during the pre-start visit. When a loss adjuster is involved there are even more variations.

So although the surveyor led models and MA Assist’s model create similar cost outcomes for EOW claims, MA Assist’s model gets there quicker through fewer variations and, as we have demonstrated in previous opinion pieces, creates better claim outcomes for the customer.

Provisional sums

The NSR claims perform well when the provisional sums are considered. The table below shows the average percentage of claim costs that are provisional sums (blue) versus scheduled line items (orange).

Provisional sums in EOW claims

Those claims that use MA Assist’s NSR have far fewer provisional sums in the scopes of works – less than 20%. This is as expected as the NSR has been designed specifically for the types of work our contractors carry out. All other schedules of rates have, on average, around 30% provisional sums in the scopes. This clearly creates an issue for insurers’ reserving as such high levels of cost estimation make reserve calculations variable until the final costs come in when the claim is closed.

There is a clear link between the number of line items in a schedule of rates and the level of provisional sums used. If a schedule of rates is long and complicated a surveyor finds is much more difficult to find all of the right scheduled line items that he needs to build up his scope and so is more likely to resort to provisional sums.

There is also a clear correlation between claim values, number of variations and percentage of provisional sums – the higher the provisional sums, the higher the claim value and the more variations there are. The loss adjuster led models perform poorly on this measure as well as the others detailed above.

So not only does the MA Assist NSR model create accurate scopes of works with fewer variations, it also reduces the use of provisional sums which creates more certainty for claims handlers in their reserving and CoR forecasts.

We have looked at the provisional sums for the different models in more detail and tried to compare them. Detailed comparisons are difficult due to the different structures used for each schedule of rates, but there are some clear trends.

For the loss adjuster led models provisional sums are incurred across all trades and line item categories. Only around 37% of provisional sums relate to floor and wall finishes and kitchens. Scaffolding, protection, welfare and debris removal account for another 26% with the remainder spread across other categories such as brickwork, electrics and decoration.

By comparison, floor and wall finishes and kitchens account for around 80% of provisional sums under the MA model using the NSR. This is because the NSR has been designed specifically for the type of work MA Assist contractors do, so there is little need for provisional sums other than flooring, tiling and kitchen units.

The surveyor led models have around 68% of provisional sums relating to floor and wall finishes and kitchens, leaving around one third of provisional sums spread across other trades and categories, such as electrics, decorating and roofing.

Claim durations

All of the above factors have a significant impact on EOW claim durations. We have looked at the trends for claim durations for the various models over the last 3 years, and it is clear that those models that involve higher numbers of variations and provisional sums result in longer claim durations.

Claim durations for EOW claims

The graph above looks at relative claim durations for the different models over the last 3 years. NSR claims consistently have much shorter claim durations.

As everyone in the industry knows, the longer a claim remains open the higher the administrative costs are. Such costs are not easy to measure, but it is clearly in the interests of the insurer, claim handler and customer, that an EOW claim is opened and closed as quickly as possible. Those clients that instruct MA Assist directly and use the NSR rates are experiencing claim durations that are consistently over 20% shorter than the average.


We have also looked at customer satisfaction for EOW claims across these different models. We collect NPS data for all of our clients and, as can be seen from the graph below, NPS scores are much higher with the MA Assist model.

NPS for EOW claims


Our data clearly demonstrates that different commercial models create different cost profiles and outcomes for EOW claims.

Insurers concerned about EOW claim costs should use the surveyor led or MA Assist NSR models. However, if an insurer is also concerned about the customer journey and ensuring that EOW claims are scoped correctly with fewer variations and delays to the claim, then insurers should be instructing MA Assist directly and using the MA Assist NSR.

Loss adjuster led models create higher claim costs, higher variations and uncertainty over final costs through the high use of provisional sums. Similarly where specialist drying companies are used this can add cost and elongate the claims lifecycle more than it would be through a streamlined approach.

The three parts of our series have identified areas where insurers can make changes to bring their increasing EOW claim indemnity spend under control. In summary:

  • By understanding the cause of the EOW claim insurers can direct the claim down the most appropriate remedial scheme.
  • Cost escalation is taking place in the bathroom and kitchen, so underwriters need to adjust their risk assessment accordingly.
  • Most leaks are caused by pipes, washing machines and WCs so insurers need to understand the age of the property and its plumbing, where bathrooms are situated and whether renovations have been done recently, when pricing a policy.
  • Customer lifestyles have an impact on the severity of claims, another point for underwriters to consider.
  • Insurers need to assess their policies in relation to matching items and be consistent in their approach. Making contributions to matching items helps customer satisfaction, but insurers need to be aware of the impact this has on EOW claims costs.
  • Commercial models and schedules of rates create different EOW claim values and outcomes. Complicated, inappropriate and long schedules of rates, create more uncertainty around scopes and reserving and increase the use of provisional sums.

Indemnity cost control is achieved through expert validation in the surveyor led and MA Assist models, but to minimise the overall cost and duration of EOW claims and to improve customer satisfaction, insurers should consider using the direct MA Assist model where customers want a fulfilment solution.

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