Flood Risk Insurance
Flood risk Insurance for high-value homes can be a difficult area to navigate without knowledge, experience, and access to appropriate markets and underwriters. Here at McLeod Insurance we are experts in High Value Home Insurance and offer a bespoke, tailored approach to flood risk insurance for your home.
How many Properties are at Flood Risk in England?
Around 5m (or a sixth) of the properties in England are considered a higher than average flood risk. This figure is on the increase with the long-term effects of global warming sure to have an impact. The flood risks come from sea, river, rising groundwater, sewer problem or flash floods. Historically, Underwriting around these problems can be tricky for Insurance Companies.
Insuring High Value Property in High Flood Areas
Insuring a property that is in a high flood area can be challenging. For many years Insurers have either refused to insure properties in high flood areas, charged an astronomical premium or imposed onerous terms. If you live in an area with a higher than average chance of flooding it is prudent to analysis your home insurance policy, as a standard policy may not adequately cover you in the event of a claim.
This is especially the case if you live in a high value home as the more individual a house the more likely a standard policy does not suit.
If you live in a high value home that is also in a high flood area, then options should be available to you.
Firstly, you will fit the criteria of a High Net Worth Insurer. This will mean that you will have an Underwriter looking at your individual risk and not an insurer that will just look at your general postcode flood risk. Standard ‘one size fits all’ home insurance policies do not look in detail at your specific property but take a broad stroke approach.
Standard Home Insurance policies only consider the area and the type of property and take a much more general view.
Flood Risk Insurance for High Value Homes
If you fit the criteria of a high net worth Insurer then a much more bespoke policy will be available to you. This will help, especially if you have managed the flood risk element yourself to mitigate any loss.
Secondly, you will likely call upon the help of a High Net Worth Broker, such as McLeod Insurance. A good Broker will help you place your business with the correct market, offering the broadest cover for the most competitive premium. Having experience of the high value home insurance market is especially useful when placing your business as the devil is very much in the detail as far as a policy wording is concerned.
How do I get insured against flooding?
Over the last few years we have seen dramatic floods taking place all over the country.
The terrible floods in 2007 saw several people killed and some 55,000 homes affected. The government commissioned a review, which concluded that we stop building on flood plains.
This seems like a reasonable conclusion and begs the question, why were we building on flood plains in the first place?
Why are we still building on flood plains?
Sadly we do not seem to have learnt from our mistakes and large-scale building on floodplains has continued.
In fact, statistics from the Committee on Climate Change (CCC) are quite revealing. Housing in areas where flooding is likely has grown at a rate of 1.2% per year since 2011.
The building of residential properties in areas of low risk has risen by just 0.7% over the same period.
You would imagine that the market value for homes built on flood plains would be affected. Surely people would not intentionally purchase on a known flood plain?
However, this does not seem to be the case. In fact, in areas such as Tewkesbury, Gloucestershire and Cockermouth in Cumbria, we have seen house prices continue to increase.
Protect yourself from flooding.
So what can we do to protect ourselves from the devastating impact of flooding? The obvious answer is to insure yourself against flooding.
However depending on where you live this is getting ever more difficult to do. As I have mentioned before the larger insurers are primarily interested in the mass market.
They do not tailor their policy’s to the high value home when it comes to flood insurance.
They are interested in the numbers and with the majority of people in the UK living in homes valued at less than £200,000, this is where they focus. That is not to say that the large Insurance companies will turn your business away, far from it.
They will welcome your business but they will sell you standard, one size fits all policies that can often be worthless in the event of a claim.
You need to be properly covered in the event of flooding.
Here at McLeod Insurance, we tailor our policies to ensure that you are properly covered in the event of flooding.
As a specialist broker, we ensure that there is no small print preventing you from a claim. Standard policies can often have a caveat making them null and void. If for example, you live within a certain distance from a river.
Specialist high value insurance broker.
Because we are specialists in high value home insurance we offer a higher level of service. We very often come out to inspect our client’s homes and are able to offer a higher level of advice and therefore a better service.
You would imagine that the personal touch comes with a premium? Actually, this is not always the case. A tailored policy that suits your requirements may well be a more cost-effective way to insure your high value home.
As a broker, we are able to search the marketplace for the right policy for your needs. With nearly thirty years of experience in the high net worth arena, we are often able to spot quick wins and efficiencies.
Mass-market policies offered by the larger insurers.
As mentioned above the larger insurance companies are looking to insure the mass market and very often have loss leading policies for the standard customer.
Often these policies are a blunt tool and can be not worth the paper they are written on in the event of a claim. No such lost leader is available for the high value home.
Every client is unique and requires a tailored approach.
Having worked in the insurance business for many years we have seen this blanket, one size fits all policy in action. One of the reasons we have set up McLeod Insurance in the first place was to offer a better service.
We have seen a gap in the market for a more specialized approach to high value home insurance. We do not covet the mass market as, to be honest, they are adequately covered by the large Insurance company’s. Our aim to provide a service for those that are not currently adequately covered by the larger insurers.
Climate change a very real problem.
The storms and floods that have so tragically affected the UK in recent months and years have caused not only great financial damage but also in extreme case the loss of lives.
With more than 55 million homes at risk of flooding, it is a problem that is not going away. Climate change experts predict that sea levels will increase by between 13cm and 76cm by the year 2095.
The Conservative / Liberal coalition government reduced flood defence programs by 8% in their first year in power.
This is a 27% cut in cash terms according to the Environment Agency.
It is even more important to protect yourself from the ravages of nature than ever before.
What have the Government done to remedy the Flood Insurance situation?
Flood Re is a joint initiative between the Insurance Industry and the Government. Its aim is to make the flood peril affordable to people living in high-risk flood areas.
Flood re is a not for profit organisation.
How does ‘Flood Re’ work?
Every Insurer that offers home insurance in the UK is obligated to pay into the Flood Re scheme. The levy raised from these insurers totals more than £180m annually and is used to help pay flood claims.
If Insurers are uncomfortable with the flood risk element of a risk then they can buy the flood cover from Flood Re for a fixed price. Whilst the price for the flood element of risk is not cheap, it is a much better option than not having flood cover at all.
In the event of a claim being submitted from a client insured with an insurer that has purchased Flood Re, the insurer will pay any flood claim initially and then look to get reimbursed from Flood Re.
This is a clear advantage for the homeowner as it avoids lengthy delays in receiving payments. This, in turn, means that any remedial work can begin in a timely fashion and your home can be back to normal without the headache of major delays.
- Flood Re was created in April 2016.
- Council tax bands A-H are eligible for Flood Re.
- Expected to be in place for twenty-five years.
- Flood Re was designed to give affordable flood cover to those at the highest risk.
Note: Not all homes are eligible and not all Insurers take part in the scheme. Contact a specialist High Net Worth Broker for details.
How does Flood Re calculate premiums?
Flood Re calculates how much premium to collect on an acceptable flood risk property by which council tax band the property is in. In addition, Flood Re apply a £250 excess to any flood claim.
Will all Insurers consider your property a flood risk?
Not necessarily, all Insurers have different tolerance levels to different areas. One Insurer may consider a property in a high flood risk area and have to purchase flood cover via Flood Re at an inflated premium. Other Insurers may not consider the risk in a flood area and they may be comfortable to cover themselves. This is likely to make them more competitive for a High Value Home. Knowledge of the various underwriters’ requirements can save you in both time and money and is something a good high value home insurance broker can help with.
Changes to Flood Re application process.
Andy Bord, the chief executive of Flood Re has just announced new changes to the way Managing General Agents (MGA’s) are be able to access Flood Re. From today (14th May 2019) MGA’s will be able to send cede policies on behalf of their insurers directly to the Flood Re scheme. This is a welcome change to the complicated, admin heavy process that has been in place to date.
Andy Bord said “We have already made great progress in improving the availability and affordability of home insurance in flood-prone areas through the direct-to-insurer market,” and then went on to say, “We are hopeful that this move to give MGAs access to the same system as insurers will make it easier for consumers to get a better deal. We’ve worked with the broker industry to find a solution to opening up the scheme and expect this new facility will be welcomed by the industry and consumers.”
This move has been broadly welcomed by the market and should benefit both the customer and the agents. As more and more homes are being constructed in flood-prone areas improvements in Insurance solutions is of paramount importance.
For more information on this announcement see this article from Paul Lucas in the insurancebusinessmag.com
Are any properties excluded from Flood Re?
The majority of properties in high flood areas will be acceptable to Flood Re, with a couple of exceptions. Properties that are built after 1st January 2009 are not acceptable due to Flood Re not wanting to incentivize home building in high flood areas. In addition, flats in leasehold blocks, that contain more than 4 flats, are also excluded.
Here at McLeod Insurance, we have many years worth of experience in placing high value home insurance policies and can help you through the many pitfalls when it comes to flood risk premiums. Give us a call or drop us an email for any help and assistance you may require.
We have put together a list of websites you may find useful when looking to prevent flooding in your property.
Department for Environment, Food and Rural Affairs (DEFRA)
The National Flood Forum
Property Care Association Flood Protection Group
Know your flood risk
Polygon Essential Guide To Flood Planning and Preparation
Give us a call today if you would like to discuss any of the topics discussed here, we are always happy to assist.