The water industry in England and Wales is undergoing a quiet but devastating shift. Once accountable for the infrastructure delivering water to our homes, water companies are increasingly passing the buck. Burst pipes and underground leaks that were once their problem are now being treated as the homeowner’s responsibility. On the surface, this may sound like a technical change. In reality, it has profound consequences — for insurers, for customers, and for the long-term stability of both sectors.
How Costs Are Being Shifted
Traditionally, water companies were responsible for maintaining and repairing water mains up to the property boundary. But in practice:
- Leaks under driveways or gardens are increasingly labelled as private-side issues.
- Customers are told to contact their buildings insurer, not the water company.
- Insurers then face costly claims for repairs, often involving excavation, reinstatement, and water damage.
For the water companies, this is convenient: they avoid expensive repairs while continuing to extract profits for shareholders. But for insurers and customers, the consequences are severe.
The Impact on Insurers
Insurance companies are now absorbing costs that should rightly sit with utilities. The risks include:
- Rising Claim Volumes: As water companies refuse responsibility, insurers are hit with a steady stream of infrastructure-related claims.
- High Repair Costs: Underground leaks are expensive, requiring specialist contractors and disruptive works.
- Premium Pressure: Insurers inevitably pass these costs back to customers through higher premiums.
- Coverage Gaps: To control risk, insurers may begin excluding water-related damage, leaving households exposed.
In short, the water industry is offloading liability, and insurers are left holding the bill.
The Impact on Customers
For ordinary households, the consequences are immediate and painful:
- Financial Strain: Rising insurance premiums hit every policyholder, not just those affected by leaks.
- Exclusions and Disputes: Customers may find their policies don’t cover the damage, or face drawn-out disputes between insurers and water companies.
- Double Payment: Customers are paying once through their water bills and again through inflated insurance costs.
- Vulnerability: Those without comprehensive cover risk facing repair costs alone, which can run into thousands of pounds.
Customers are trapped between two powerful industries, neither of which is prioritising their interests.
The Systemic Risk
The combination of water industry cost-shifting and insurance market exposure creates a dangerous systemic risk:
- Higher Bills Everywhere: With both water bills and insurance premiums rising, household budgets are squeezed.
- Reduced Trust: Public confidence in insurers and utilities collapses as people realise they are paying more for less protection.
- Regulatory Blind Spot: Ofwat regulates water companies, the FCA oversees insurers, but no one addresses the interface between the two.
If left unchecked, this could destabilise the home insurance market, particularly if claims spike due to extreme weather or infrastructure failures.
Why Customers Are Left Vulnerable
At the heart of the problem is the monopoly nature of water supply:
- Customers cannot switch providers.
- They cannot negotiate responsibilities.
- They cannot avoid insurance knock-on effects.
This leaves households uniquely exposed, without the market protections available in other sectors.
What Needs to Change
- Clear Legal Responsibility: Water companies must be held accountable for all supply-side infrastructure up to the property boundary — including underground pipes.
- Regulatory Coordination: Ofwat, the FCA, and the Competition and Markets Authority must address cost-shifting across industries.
- Customer Protection: Legislation should prevent households from paying twice — once through bills, again through premiums.
- Transparency: Both industries must disclose the scale of cost-shifting and its financial impact on customers.
The Verdict
The current arrangement is unsustainable. By offloading their responsibilities onto insurers, water companies are masking the true cost of their failing infrastructure. Insurers, in turn, are passing the burden back to customers through higher premiums and exclusions. The result is a system where everyone loses except the shareholders. Without reform, millions of households will remain vulnerable, paying ever more for a service that fails them twice.
💧 Takeaway: The water industry’s quiet shift of liability onto insurers is creating a double burden for households. Unless regulators step in, customers will face rising bills, shrinking cover, and growing vulnerability — all while water companies continue to profit.