Survey reveals new concerns about flooding insurance
Published: 20 May 2014 | Author: Bernard Clarke
Insurance brokers are highlighting what they see as potential market failure for some groups of home-owners and small businesses following their exclusion from the Flood Re model that will be introduced following the enactment of the Water Bill last week.
A survey based on a small sample of 371 people – comprising 172 insurance customers and 199 brokers – found problems in taking out flooding insurance. The survey, carried out by the British Insurance Brokers’ Association (BIBA), found that 64% reported difficulty in the past year in placing property insurance that included cover for flooding. More than a third of customers (38%) reported difficulty in purchasing cover.
The survey also found that it was getting harder to buy or place flooding cover. More than half of customers (55%) said it had become more difficult in the last year to purchase insurance to cover flooding, and 85% of brokers said it was becoming harder to place these risks.
The prospects of getting insurance in future are even bleaker, the survey found, with 94% of both customers and brokers believing that the situation will get worse.
Where cover was available, the cost of premiums was rising and excesses were getting larger. Asked how they would cope with a significant increase in the cost of flooding insurance, customers responded in a variety of ways:
- 47% said they would restrict their insurance by, for example, removing cover for flooding from their policy;
- 16% said they would forego insurance altogether;
- 17% said they would sell their property or business; and
- 29% said they would need to sell or move home.
Now that the Water Bill has been enacted, the former "statement of principles," under which insurers had continued to offer policies to most existing customers, will be replaced by the Flood Re scheme from the summer of next year. But lenders, owners of homes and businesses, and insurance brokers remain concerned about the extent of proposed exclusions from the scheme.
The Flood Re scheme will no longer guarantee the availability of cover for most leasehold properties, homes built after 2009 or those in council tax band H, and for a number of small businesses and charities.
We will continue to work in support of the interests of lenders and borrowers – and for the widespread availability of comprehensive and affordable flooding insurance – as the Flood Re proposals are developed following the passing of legislation.