Hydraulic Fracturing: Understanding how this affects your home insurance, now and in the future

The purpose of this post is not to offer commentary on whether Fracking poses a risk to peoples’ homes or health, but to offer some clarity on how your home insurance would react in the event of a loss, and to highlight some key considerations if you own property in the proximity of a fracking site.

Fracking is what is known in the insurance industry as an ‘emerging risk’, similar to asbestos in the 70’s, online crime at the turn of the millennium, and driver-less cars in the future. This means that insurers are not currently experiencing a volume of claims that would allow them to adopt an underwriting strategy. Indeed, this risk may never emerge.

The main perils that reportedly may be affected, include:

  • Earthquake, movement and tremors
  • Pollution and Contamination
  • Impact, Riots and Vandalism

Earthquake, Movement and Tremors

The majority of household insurers will provide cover for damage caused by earthquake, movement and tremors. I have not experienced any policies that will specifically exclude these perils if caused by fracking… yet.

This is the most talked about scenario in household insurance in relation to fracking and the one that would likely cause a shift in the industry. Claims of this nature would involve a long monitoring period, followed by a legal process aimed at proving negligence on the side of the fracking operator. The process would be long, complex and costly. If this became a genuine risk to insurers, it would be likely that they would take this into consideration when applying conditions, calculating pricing or choosing whether to offer terms at all.

In summary, it is likely existing cover will apply, but if insurers do end up paying claims, homeowners in fracking areas can expect an increase in premiums and/or access to a restricted market place. 

Pollution and Contamination

This is probably the hottest topic surrounding fracking in the public eye and unfortunately, it is very unlikely it will be covered by your household insurance.

Pollution tends to be a restricted or excluded peril in most policies and if your water supply were affected, it would more likely be an issue to discuss with your water provider. If your own private water source were affected, then it is likely that legal proceedings would be the most appropriate route for you to take. Some policies offer legal protection but this is ordinarily based on the provider having a likely chance of winning the case – a ‘prospect of success’ clause.

Impact, Riots and Vandalism

The process of fracking normally brings a spotlight to quiet rural areas and with this, comes disruption. This is caused by the arrival of heavy machinery and increased traffic caused by the fracking companies, which is often followed by protesters opposed to the fracking practice. We have not experienced any claims related to impact, riot or vandalism yet. However, there does lie an increased risk. Fortunately, most household contracts will provide cover for this, on the premise they are made aware as soon as the incident occurs.

To conclude, it is still to early to say how fracking will really affect people’s home insurance policies but the above should offer some areas for you to consider if you live near a potential fracking site.

If you are concerned by the impact of fracking in your area and specifically, whether you are covered in the event of an incident, please do get in touch to discuss – we would be more than happy to help.

Author: Ben Pickles, Art & Private Client Manager
Tel: 07376 082402
Email: ben.pickles@mcclarroninsurance.com

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