New scheme launches to help UK home owners susceptible to flooding

A scheme has been launched in the UK to help people with properties in areas susceptible to flooding to get affordable home insurance.

Flood Re is described by the Association of British Insurers (ABI) as a word first. It is not a home insurer but will work behind the scenes with existing insurance companies so that people with home in are most likely to flood can shop around to find policies with affordable premiums and excesses.

‘It’s great to see so many insurers ready to make use of Flood Re from launch. The launch is just the start of a process and we know more providers will join them over time, bringing even more choice for people with homes at risk of flooding,’ said James Dalton. Director of general insurance policy as the ABI.

‘Insurance is an essential safeguard for your home and belongings. People in flood risk areas not being able to access affordable cover was a major concern, and why the insurance industry went to great lengths to design and create this world-first solution along with Government,’ he added.

But research by home insurance expert Admiral suggests more needs to be done to educate those affected as only one in seven of have heard of the Flood Re scheme.

It found that despite 67% believing severe flooding events will become more frequent in coming years, just 15% said they worry about their own home flooding.

Relatively few people surveyed, just 7% said they have suffered a flood in the past, but it’s clear that for those that were, it was devastating.

Admiral asked them the worst thing about their own flooding experience and 21% said the destruction of their furniture and carpets while 16% said it was the emotional stress that the flood caused.

‘Although Flood Re won’t prevent flooding, it is good news for home owners who have been previously flooded or who have had difficulty getting insurance because their home is at risk of flooding. However our research shows only 15% have heard of the scheme,’ said Noel Summerfield, head of household at Admiral.

Flood Re works by charging all home insurers a fee and it’s this fee along with other charges to insurers using the scheme that pays for any associated flood claims.

It is launched at a time when the Environment Agency estimates that one in six homes are at risk of flood in England alone. Most experts agree that incidents of flooding are likely to become more commonplace.

Not everyone Admiral surveyed would be put off buying a house if there was a risk it might flood, only 62% said they would never consider buying a home that was at risk of flooding, no matter its price.

Some 12% said they would consider buying a home if the price it was up to 30% below its true cost. While 29% would do it if they could get up to 50% off its true cost.

However a house that is prone to flooding was ranked as the issue most likely to put off a home buyer and 78% of those surveyed said it would definitely put them off buying a house, ahead of being in a high crime area, which would put off 77%.

According to the Association of British Insurers, insurance companies paid out £1.3 billion in flood claims last year and the average cost of a claim was £50,000. The survey found that 59% think that the main responsibility lies with the UK government for tackling flooding issues while 57% said it lies with the Environment Agency.

‘Some people have been with the same insurer for many years paying very high premiums often coupled with high excesses. If customers at the highest risk of flood are unsure if they can save money then we’d encourage them to shop around and even consider switching insurers before their renewal,’ Summerfield added.

The ABI says that home owners should not feel pressured to do anything in a hurry as the benefits of Flood Re will develop over time so if a policy isn’t due for renewal yet home owners may find an even greater choice of cover in a few months’ time.

It also explained that whether you benefit will depend on if you live in a flood risk area, and even then it will depend on how much you pay for the flooding part of your home insurance. A lot of people who live in a high flood risk area will already be aware of it, but there are also online flood risk maps available for England, Wales and Scotland.

Of the eligible households in the UK, the ABI expects, over time, that around 350,000 will benefit from the effects of Flood Re, although there is no cap. That’s about 2% of eligible households.

The ABI also says that it is worth asking a current insurer if they can offer more options but it is a good idea to shop around for insurance products to make sure the policy suits the property and not to focus purely on price but look at the cover offered as well.

Over time, Flood Re should mean that people with properties at risk of flooding have a greater choice of cover as a market develops fully. Comparison websites generally suit people with standard needs so finding cover for a property with a flood risk may be best done by dealing directly with an insurer.