Standards Committee T echnical Technical Conference

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2 Standards Committee Technical Conference

3 Agenda Overview of claims costs Years 0 2 claims and resolutions Years 3 10 claims What are we commonly seeing now? An example of what we might see in future? Summary

4 CLAIM COSTS

5 Total insurance claim payments in 2009/10 were 68million. Considering increases in the extent ofcover cover, number ofpolicies, changes in the economic environment and inflation, costs are in line with expectations. 45m 40m 35m Insurance claims payments py by policy section Increase in years 3 10 claims due to introduction of wider policy cover (e.g. roof coverings, render) and higher numbers of policies on risk 30m 25m 20m Recent increases in years 0 2 claims (insolvency and rule 27) due to 15m economic downturn 10m 5m 0m 2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 Pre completion (S1/1A) Yrs 0 2 insolvency(s2) Yrs 0 2 rule 27 (S2A) Yrs 3 10 main ins cover (S3) Yrs 3 10 building control cover (S4)

6 YEARS 0 2 CLAIMS AND RESOLUTIONS

7 The most common causes of claims and resolutions in the first two years relate to services and internal finishes, although they are less significant in terms of cost. Years 0-2 2frequency Years 0-2 costs Others 2% 9 - External works 7% 1 - General Info 3% 4 - Foundations 0% 5 - Substructure & ground floors 3% 9 - External works 7% Others 1 - General 5% Info 6% 4 - Foundations 8% 8 - Services and internal finishes 40% 6 - Superstructure 34% 8 - Services and internal finishes 16% 5 - Substructure & ground floors 10% 7 - Roofs 18% 6 - Superstructure 30% 7 - Roofs 11% Note: the costs chart includes costs incurred by NHBC in respect of insolvency and rule 27 claims, but does not include any costs of builders carrying our repairs on resolutions

8 Top 10 most frequent causes of claims and resolutions in years 0-2by standards d chapter Standards chapter % of claims and resolutions Internal services 19.9% Doors, windows and glazing 18.8% Pitched roofs 8.7% External masonry walls 8.3% Wall and ceiling finishesi 68% 6.8% Drives, paths and landscaping 6.0% Finishings and fitments 58% 5.8% Floor finishes 3.6% Painting and decorating 3.6% A consistent approach to finishes 3.4%

9 YEARS 3 10 (SECTION 3) CLAIMS

10 Superstructure and roofs account for 75% of section 3 claims, but costs are split more evenly between foundations, substructure, superstructure and roofs Services & Internal Finishes 2% Section 3 claims frequency External Works 1% Others 3% 04 - Foundations 7% 05 - Substructure 12% Section 3 claims costs Services & Internal Finishes 1% 07 - Roofs 22% 09 - External Works 1% Others 3% 04 - Foundations 21% 07 - Roofs 39% 06 - Superstructure 36% 06 - Superstructure 28% 05 - Substructure 24% Note: the costs chart includes costs incurred by NHBC in respect of section 3 insurance claims, but does not include any costs where builders have carried out their own repairs

11 Top 10 causes of section 3 claims in years 3-10 by number Standards chapter % of claims 7.2 Pitched roofs 38.2% 6.1 External masonry walls 20.4% 6.8 Fireplaces, chimneys and flues 7.6% 5.3 Drainage below ground 6.7% 6.7 Doors, windows and glazing 43% 4.3% 5.1 Substructure and ground bearing floors 4.2% Building near trees 27% 2.7% 4.4 Strip and trench fill foundations 2.1% 2.3 Timber preservation 2.1% 4.5 Raft, pile, pier and beam foundations 1.8%

12 Top 10 causes of section 3 claims in years 3-10 by cost Standards chapter Cost % 7.2 Pitched roofs 8.6m 22% 6.1 External masonry walls 8.2m 20% 5.1 Substructure and ground bearing floors 5.2m 13% 5.3 Drainage below ground 3.8m 10% Building near trees 3.6m 9% 4.5 Raft, pile, pier and beam foundations 2.8m 7% Strip and trench fill foundations 1.8m 5% 6.8 Fireplaces, chimneys and flues 1.3m 3% 6.7 Doors, windows and glazing 0.5m 1% 6.4 Timber & concrete upper floors 0.5m 1%

13 WHAT ARE WE SEEING NOW?

14 The most common roof problems we encounter are due to poor mortar to verges and valleys

15 and to ridges and hips

16 The most common external wall claims relate to damp penetration due to defects in cavity walls

17 Failure of external render is another common issue

18 Dummy chimneys often lack the correct structural support

19 Inadequate drainage

20 Inadequate drainage

21 AN EXAMPLE OF WHAT WE MIGHT SEE IN FUTURE?

22 There will be some unknown issues arising from the use of new materials and technologies 6 traditionally built inner city terraced houses with insitu cast concrete basements Domestic hot water and heating provided by ground source heat pump (GSHP) Claim for damp ingress to the basement of one house Source of leaks suspected to be either GSHP collection loop entry Ground source horizontal collection loop, point into basement or drainage service pipes and surface water pipes connection at base of basement wall are under the car park area

23 What did we find? Liquid within ground source loop running at below zero temperatures Condensation forming on internal pipe work, freezing then thawing causing water in basement Water service to one house frozen Ground below car park was frozen to a depth of 900mm Storm drain frozen Possible frost heave of car park area

24 What have we learned from this? This is only a single issue and there is no suggestion of a more widespread d problem, but it provides an example of issues to consider, in terms of New investigation techniques New repair solutions Suitable specialist contractors and consultants Building up a database of intelligence to identify common failures Extent Buildmark policy cover Providing feedback to help develop the Standards for the future Developing Inspection methodologies

25 Summary Frequency and claims payments have increased in line with expectations, due to: Wider section 3 policy cover (particularly for pitched roofs) Economic climate leading to higher h rates of insolvencies i and builders failing to carry out repairs in the first two years Issues we commonly see at present are mostly due to site work issues and tend to be difficult to pick up via inspections (e.g. poor mortar mix) The issues that modern technologies, materials and methods bring may not be those that we expect or are familiar with and we are now developing our approaches to dealing with these

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