Fracking is a subject which never seems to be out of the news for long. The controversial technique uses high-pressure water to blast gas and oil out of shale rock buried deep below the surface of the Earth. It is a bone of contention between the authorities, environmentalists and homeowners – but what about its impact on insurance?
On the 1st of September, owners of the UK's only active shale gas site, Cuadrilla's Preston New Road site near Blackpool, apologised to residents after a tremor with a magnitude of 2.9 was recorded.
Possible impacts of fracking
Worryingly for homeowners, fracking can take place beneath your property without your consent; you may not even be notified.
Supporters of fracking claim it is a very safe industry but reports from the US indicate that if things do go wrong, the consequences can be dramatic. Fracking can release contaminants into groundwater, making it toxic or carcinogenic. These pollutants could be spread across a wide area in the event of a flood. The explosions deep underground could also cause ground movement and tremors, potentially damaging properties above.
Is fracking damage covered by insurance policies?
Most UK household insurers do not list fracking in their list of exemptions, alongside terrorist incidents, nuclear strikes and acts of God. On the other hand, it is not explicitly included, either. It is an untested area; only when the claims start to roll in will we really know what is covered.
The regulation in place to cover fracking does allow homeowners to sue for compensation if their properties are damaged by the activity, but this will involve bringing a claim against a large and powerful energy company as well as proving that they have acted negligently; not an easy task. A spokesperson from Cuadrilla said it would repair any damage that has been caused.
"We are in the process of visiting local people who have raised concerns about minor damage to their property and will repair any damage that is assessed to have been caused by the seismic events."
Pushing up the cost of insurance
Even if coverage for fracking-related loss is not an issue, the cost of premiums may be. Properties located near fracking sites could see premiums go up as the character of the neighbourhood changes and the deep subterranean activities begin. This is unlikely to be welcome, especially if house values are already reduced by the fracking activity.
Until there is a clear consensus on how the UK insurance industry is going to approach fracking, the best householders can do is to research their risk levels and insurance cover carefully, and to opt for a reliable and established insurance provider.