Innovation: Firm footing on shaky ground: System developed from land survey offers owners a fairer deal on house insurance

AN information system originally developed to tell farmers what to plant where has been adopted to help insurance companies assess subsidence risks.

According to the system's developers, the current method of rating subsidence risk - based on post-codes - is so imprecise that up to 2 million householders may be wrongly assessed as living in a high-risk area.

Subsidence is caused when clay soils lose moisture and shrink in the summer. This shrinking puts stress on buildings and causes cracking.

Recent dry summers have made subsidence a preoccupation of insurers. The unusually dry weather of 1989 and 1990 pushed up claims sevenfold: in 1991, insurers paid out pounds 540m to repair damage caused by subsidence. Even in the wetter 1992, claims were pounds 260m.

The insurance Ombudsman, Julian Farrand, was so concerned he prompted the publication of a guide for householders, Has Your House Gots Cracks?, by the Institution of Civil Engineers and the Building Research Establishment, in April. The rise in claims also led to the introduction of a rating system based on post-codes for buildings thought to be at risk of subsidence.

But although post-code areas such as Milton Keynes or Guildford are assessed as being on clay soil, in some parts the soils are sandy, according to Bob Jones at the Soil Survey and Land Research Centre at Cranfield University, where Insure (Information System for Underground Risk Evaluation) has been developed. So some people are paying a high premium for no reason.

Insure is based on the most detailed survey of soils in England and Wales, classifying every hectare (100 square metres) into one of 720 soil types. Not all clay soils shrink, and those that do only shrink when they suffer a net moisture loss - because plants draw away more water than they gain from rainfall.

Cracks in buildings can also be due to heave. This is caused when moisture levels rise and clay soils expand. Because the soil survey was originally intended as a guide to farmers as to what crops would thrive where, it also contains detailed information on average soil moisture deficits in different parts of the country. The degree of detail will allow insurers to assess risk at individual post- code level, or groups of 15 or so houses.

'Insure can overlay its basic soil information with the soil moisture deficit information to produce a map that will show the degree of risk of subsidence in a given location due to shrinkage or swelling in clay soils,' Dr Jones says. 'This would allow premiums to be calculated more fairly, based on a more accurate assessment of local soil conditions.'

Insure may therefore not only lead to fairer premiums but also enable an insurance company to undercut rivals using broader-based assessments. Dr Jones says that two companies are currently running Insure against their claims records to analyse how it would improve their exposure.

Insurers have already recognised that analysing other risks down to individual post- codes will allow them to assess exposure more accurately. Some are going further and linking post-code information to other factors, such as policyholders' ages and whether the home is occupied in the day.

Householders are demanding this level of risk analysis, too. In Newcastle, people living in commuter villages with low crime rates are objecting to paying the same premiums for contents insurance as those in areas of the city where the burglary rate is high. The Tyneside branch of the National Federation of Consumer Associations put forward a resolution at its annual general meeting on 9 July demanding that insurers harness the power of computer systems to assess risks down to post-code level.

Dr Jones says the Insure system could be further refined to make it predictive by factoring in more recent weather data. 'Although it wouldn't be possible to avert subsidence, this would alert insurance companies to the possible risk.'

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