How to mitigate against flooding with insurance

27 September 2022

Flood Statistics:

• Around 5 million people live in flood risk areas in England and Wales.
• One in six homes in England is at risk of flooding.
• A further 2.8 million properties are susceptible to surface water flooding alone.
• Annual flood damage costs are in the region of £1.1 billion across England.
• 36 people have died as a result of flooding in England and Wales in the past 10 years.
• Statistically, your home is more likely to be flooded than burgled!
• Flash floods can bring walls of water from 10 to 20 feet high.
• 25% of flooding occurs outside areas formally designated as being flood prone.
• 40% of businesses do not reopen after suffering a catastrophic loss.

References: Environment Agency, Defra, Parliament UK, AquoBex.

The flood events in South Yorkshire and the Midlands in late 2019 – early 2020 brought claims costs at over £500million.

There is currently much debate about the causes of climate change but there is little debate that the climate is changing, becoming less predictable and more extreme. For 5 million households, and many businesses in the UK, flooding is now a major risk. There are ways of mitigating your exposure to being flooded but when water arrives en masse as a force of nature, there is not much that can stop it from wreaking havoc. This may now not also stem from rivers and streams, but may be from pluvial losses like the recent storms in London when many inches of rain fell in a very short period of time and significant flooding left properties flooded, roads impassable and closed underground rail stations

FloodRe, a joint initiative between the Government and Insurers, aim was to make the flood cover part of household insurance policies more affordable, but unfortunately this does provide cover for commercial properties.

However, we now have access to alternative ways of including flood cover:

The flood costs are greater in traditional insurance because they need to pay loss adjusters, claims teams, legal or other costs.

Traditional insurers are more exposed to uncertainty when a flood occurs. They can’t predict the exact damage caused by a flood because of all the variables so their final bill is unknown – and they deal with this uncertainty by charging more premium or refusing to cover flood at all. Whereas with this alternative you agree a set pay out amount up front for when a flood occurs which they measure using a sensor that’s fitted to the property.

LE. 10 cm flood = £25,000 pay out or 25cm flood = £40,000 pay out etc.

They don’t have the costs and uncertainty mentioned and this means that the premiums can be significantly lower than traditional providers:

• You simply select what depth of water would cause you problems
• You then select the amount of money you would get if the water reaches that depth
• An electronic sensor is installed on the outside of your building if the water reaches the selected ‘trigger’ depth, the sensor transmits a message and payment is sent — no delays, no paperwork.

In fact the fastest claim recently took just 9 hours and 44 minutes from the property flooding to the client receiving the full settlement in their account.

• The payout does not come with conditions: you can use it for any purpose.
• For example: covering losses from business interruption; replacing damaged stock or clean-up repair costs.
• The premium can be tweaked by adjusting the ‘trigger’ depths and payment amount — and there can be 5 trigger depths, giving further pay outs if the flood level rises.

We also have a further option where you can pay an additional premium to a specialist insurer to cover any increased flood excess.

This insurance has been developed with the help of the UK’s foremost flood prevention and restoration experts, to offer you the chance to insure the excess which in some circumstances can be up to £50,000 or more.

So, if you are facing renewals with increased flood excess or are looking to insure new build properties that the Insurers are saying is in a high flood area and excluding flood cover please do not hesitate to contact us.