Stuart Plane Cert CII
Sales and Development Manager for Stackhouse Poland.
Stuart has over twelve years experience in the Insurance Industry. At Stackhouse Poland Stuart’s key areas of expertise are HNW individuals for their personal insurances, commercial property cover and insurance programmes for the white collar professional sector. Stackhouse Poland is the current Insurance Broker of the Year.
Flood Insurance – an update
Over the past five years the UK has experienced continual flood and storm incidents nationwide. This has had catastrophic affects for a number of households who have witnessed terrible damage to their homes. The floods of 2007 were described by the Government as the biggest peacetime civil emergency since World War II.
As can be expected with the floods that have occurred, the insurance industry has witnessed considerable losses for flood claims, which are predicted to follow this trend with the UK weather patterns. In many cases Insurers have started to apply large increases to insurance premiums due to the risk of flood or even exclude cover in its entirety. This could have implications in obtaining a mortgage due to flood cover being in force a condition from the lender.
There has been considerable investment from Insurers in the underwriting systems and area checks that are used to identify the flood exposure at a property. Until recently the majority of Insurers used a postcode generated result which utilised the first five letters/numbers of the postcode and the claims data held for these locations. Although this helped identify a degree of risk exposure, it did not provide an in-depth result and could often include a number of streets with the same postcode. It could be that all these houses in the area are not at a high risk of flooding. For example a road that is on a hill, the houses located on the top would have the same flood result as a house built at the bottom.
The new software that has been developed has the ability to pin point a property within five metres but also maps flood water from point of occurrence, the journey the water will travel (pluvial flooding) and where the water will collect. This allows Insurers to gain a far greater understanding of the risk and predict the likelihood of claims. These systems also take into account insurer’s individual claims data that has been collated over a period of time, mapping technology and combines the flood water tracking results to provide a far more accurate picture.
The result of this new technology is that properties previously thought to be a low flood risk area have been reclassified and the flood excess or overall premium increased to reflect the exposure. Many policyholders find this difficult to understand given their properties have never had any history of flooding or, in their opinion are at risk. The role of the insurance broker in these instances is to provide reassurance and ensure the client holds the best available flood cover under their policy. Where there have been flood issues, we recommend you seek the advice of a specialist broker to ensure that property is insured adequately.
The Government and the Association of British Insurers have started developing a non-for-profit flood fund to be Flood Re. The aim is to provide affordable and available flood insurance and will commence September 2015. However, from the details provided to date the fund will exclude a property that falls into highest Council Tax band H, homes built after 1st January 2009 and leasehold properties and those consisting of a commercial nature including buy to lets.
Flood Re is certainly a solution we welcome but the current proposals do not offer enough protection to a community in its entirety. If the Flood Re were to be extended to include any property used for residential regardless of the setup of the insured entity it would become complex given some locations are a mix of commercial/ residential use and some units are purchased on a buy to let basis. Perhaps the solution would be for all UK properties to be included, however this may not be feasible.