Struggling to Get Flood Insurance Cover?

May 11, 2022

Struggling to get flood insurance cover?

Traditional flood cover isn’t working for businesses most at risk. Many face challenges such as:

• Postcode Area – An insurer denying a quote simply because, many years ago, a neighbour claimed for flood damage
• Complicated Terms – Restrictions may be applied to a policy such as averages, high excesses and exclusions for flood, making it difficult to understand what situations you are actually covered for
• Slow Claims – Traditional claims for flood can take months, even years, to be paid out in full
• Expensive – Flood cover can be very expensive and a huge strain for small businesses

According to the Environment Agency’s last published flooding risk and impact analysis (December 2019), 5.2 million homes in England alone are at risk of flooding.¹ Thankfully, many built before 2009 can access subsidised flood insurance under the 2016 Flood Re scheme, running to 2039.²

Regrettably, there is no such support for the 1 in 6 commercial properties similarly classed as at-risk from flooding.³ Many have no other choice but to accept high flood insurance excesses or take out insurance with no flood cover. The Federation of Small Businesses suggests many small businesses with premises on floodplains lack flood insurance protection and are exposed.

Unfortunately, things are unlikely to improve. The Environment Agency says the number of properties on floodplains is likely to double to 4.6m within 50 years and they predict a 59% increase in UK rainfall by 2050.

Businesses should carefully evaluate their flood risk – whether from sea, river, surface water or groundwater – and be cautious in bad weather. A quick search on the Government Flood-Warning service⁴ can reveal whether quick anti-flood measures, such as moving equipment and goods, are necessary. Businesses should also take the time to fully understand and appreciate their insurance policy’s flood terms and excesses.

Those struggling to buy flood insurance could consider a new insurance lifeline – parametric insurance. This term sounds complicated but it is actually refreshingly simple. A business can purchase standalone flood only cover designed to avoid the headache of traditional insurance.

A standalone flood policy works in 3 steps:

(Source: FloodFlash | How It Works)

1. You set the cover – The business selects a trigger depth and chooses the amount of money they would receive if that depth of water enters the property. This should be based on the cost of getting things back to their pre-loss condition and any additional expenses and income losses incurred. It is important to set realistic triggers and a sensible pay-out level which is then regularly reviewed.
2. Installation – A smart sensor is fitted to the property and monitors the water level 24/7.
3. Automatic pay-out – Once the sensor detects that flood water has reached the trigger depth, the business is automatically issued a quick, excess-free pay-out, usually within 48 hours.

This process avoids the much dreaded loss adjuster visits and lengthy claim negotiations!

When setting the pay-out value, businesses should consider aspects such as:

• Building repairs
• Drying-out costs
• Surveyors’ fees
• Site clearance
• Other costs such as
  • Damaged stock
  • Possibly continuing to pay wages whilst closed
  • Lost revenue
  • Rehousing costs
  • Long-term interruption
  • Reputational damage

2 in 5 small and medium-sized enterprises (SMEs) never reopen after a catastrophic flooding. A swift pay-out and diving straight into a recovery plan could significantly better the chances of business continuity.

If facing a flooding risk, contact your broker to discuss and assess your options. If you would like to discuss your insurance with us, please get in touch.

Having the right strategy in place, including insurance, could be just the thing to keep your business afloat.

Sources:
1 House of Lords: Housing developments on functional flood plains
2 Flood Re
3 UK flooding statistics: get clued up with five big flood facts
4 GovUK: Check for Flooding Service