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Counting the Financial Costs of the August 2011 Riots

Introduction

This publication sets out:

  • The role played by insurers in helping customers recover from the widespread riots which gripped many parts of England between 6-10 August 2011.
  • The continuing need for the Riot (Damages) Act 1886 to provide compensation to those uninsured and under-insured, but for the Act to be updated to reflect modern day society.

Executive Summary

Between 6-10 August 2011 many cities and towns in England were hit by the worst riots in a generation. An estimated 13,000 -15,0001 people were involved in the rioting, which cost five people their lives. More than 5,000 crimes were committed, including 1,860 incidents of arson and criminal damage, 1,649 burglaries and 366 attacks on people. Some 661 areas experienced riots.

While there has been much debate about the possible underlying causes of the rioting and how to reduce the likelihood of them happening again, two things are indisputable: the scale of the distress and property damage caused, and the important role of insurers in helping businesses and homeowners recover.
Insurers responded quickly to help their customers whose homes and businesses had been damaged or destroyed by the riots. Insurers expect to pay out around £200 million.

The riots also highlighted the importance of a little known 126-year old piece of legislation – The Riot (Damages) Act 1886 – which provides compensation to those affected. The Act ensures that riot insurance continues to remain widely available and competively priced as a standard component of property insurance. Old though it is, the purpose of the Act stands the test of time; arguably it is more relevant today than ever. But, not surprisingly, the 2011 riots highlighted that it needs to be updated, and we urge the Government to learn the lessons of last August to ensure that the Act is updated so that it is fit for purpose in our modern society.

Lessons from the riots

What worked well:

  • Despite considerable challenges in accessing some damaged properties due topolice restrictions while investigating criminal damage, insurers reacted quickly, helping thousands of customers recover.
  • The Government responded speedily in setting out its commitment to provide compensation under the Riot (Damages) Act.
  • Swift extension by the Government of the time period for people to claim under the Riot (Damages) Act from 14 to 42 days.
  • The Government and the ABI worked together to develop a new claim form and to establish a bureau to process claims from those without insurance.

 

What did not work so well:

  • The lack of a uniform, and in some instances an overly bureaucratic approach, by police authorities to the evidential requirements of whether a ‘riot’ had occurred in a particular area.
  • An often slow and cumbersome approach by police authorities to processing claims under the Riot (Damages) Act, which some people wrongly thought was the fault of their insurance company.
  • In some cases, albeit due to unavoidable reasons such as an on-going crime scene, delays in insurers being able to access properties to assess the scale of the damage and repairs needed.
  • A number of customers were found to be under-insured, some substantially. This highlights the need for insurers and brokers to stress to customers, particularly small and medium enterprises, the importance of regularly assessing the level and scope of their insurance cover.

How insurers reacted to the riots

Insurers responded quickly to help customers whose homes and businesses had been damaged or destroyed by the riots. Their priority was to ensure that customers could get back in their properties swiftly and, for businesses, to ensure that they could resume trading as soon as possible, whether back in their repaired
premises or in temporary alternative accommodation.

Insurers expect to pay out around £200 million to customers in respect of damage to property, vehicles and business interruption losses. Currently 92% of small to medium sized businesses have had their claims settled or received interim payments. Insurers are of course doing everything they can to ensure that any outstanding claims are settled as soon as possible. Delays in being able to access and inspect damaged properties in these exceptional circumstances, and the complex nature of many large commercial claims, have meant that some have taken longer to settle.


Last updated 01/07/2016