An historic opportunity

If you walk down any street in any town or city you will come across some type of heritage property. Heritage buildings are all around us and interest and support for their preservation and protection is growing.

Of course, these properties are protected by insurance. However, heritage buildings have not been identified as a market segment of their very own until relatively recently and have not necessarily been treated any differently than any other property.

There is one very obvious reason for this. The market is so diverse - arguably more diverse than any other. There are approximately 445,000 listed buildings in Britain, however, 'heritage' in its widest sense can include everything from castles to shops, even monuments and jousting events. 'Cultural heritage' is everything that is valuable about our society. It is not just ancient ruins; it is also modern buildings like public swimming baths, theatres and pubs. These are not necessarily listed but cannot be considered as 'ordinary' and can be protected in some way.

A large number of listed and historic properties are residential. Their architecture and level of protection make them distinctly different from high net worth. Even if their rebuilding costs are equivalent, their heritage value to society is really quite different.

The heritage market as a whole presents a wide spectrum of risks that are likely to number around six million properties. The commercial buildings in this category alone number in excess of 500,000.

A broad market

Heritage's broad market, presents broad opportunities. People are awakening to the value of our heritage and the need to protect it.

The main attraction of this market for brokers is that, at present, it is almost entirely brokered already. Heritage property owners have some level of understanding of the value of their property, and so are keen to seek the professional advice of a broker.

However, there are few tailored policies on the market, so it is unlikely that heritage property owners are benefiting from specialist cover or value-added services. Also, despite an appreciation of property value, owners are frequently unaware of true rebuilding costs. A recent survey showed 80% of brokers agree that businesses operating from heritage buildings are often unaware of the complications that can arise through rebuilding or repair.

There is an opportunity for brokers to prove their worth and help heritage property owners to protect their buildings properly. However, what skills do you need to do this?

First of all, you need a personal appreciation of the value of historic buildings. This is not just package insurance, it is tailored protection. Where commercial heritage properties are concerned, you also need to understand that many property owners are business people first and foremost. So they realise the value of their property - an 18th Century coaching inn with oak beams and a roaring fire may no longer have the same pull if replaced with fibreglass bricks and off-the-shelf fittings. Their insurance arrangements do not necessarily reflect this, so it is a broker's job to help them understand the risks not having appropriate insurance can put on their business.

To remedy this, brokers need access to expert survey and risk management services. Accurate valuation is paramount. And once the true value of a property has been established, a policy and service is needed that accommodates it.

Some policies include tailor-made wordings, higher standards of claims service and additional cover benefits. This can help with lengthy and costly repair costs in the event of a claim. It is very likely that heritage property owners will not have any choice about how their property is restored - listing conditions or conservation practices will dictate how it is done. Conversely, non-listed property owners might want to see a full sympathetic restoration when ordinary insurance cover only accommodates a basic standard reinstatement.

The materials needed to repair heritage properties are usually more expensive and the craftspeople to do the work more costly to employ and less available. Work often has to be done by hand. All this adds to the claims cost or becomes an expense the property owner would be forced to pick up if they did not have the right cover. What is more, if repairs are lengthy the maximum indemnity period for business interruption may be inadequate, giving the property owner a further financial headache to consider.

This service can clearly justify a price premium - something that will come as a welcome respite to many brokers struggling with price competition. Every market will be price sensitive, of course, but if brokers can clearly show the service and expertise they bring, customers will be willing to pay for it.

After all, heritage properties are more than just old buildings. They are a part of our history and brokers can play an important part in ensuring they are around for generations to come.

- Joe Gray, Intermediary operations manager, Ecclesiastical Insurance.

TARGETING HERITAGE

- Understand the size and scope of the market

- Appreciate property owners' concerns

- Provide access to valuable survey and risk management expertise

- Promote unique policy benefits

MARKET FACTS

- More than 445,000 listed buildings in the UK

- Greater London has the greatest concentration of listed buildings, Devon has the greatest number

- There are 24 world heritage sites in the UK - including the City of Bath, the Tower of London and the Dorset and East Devon Coast

- Around six million 'historic' buildings in the UK.