Householders in UK flood-prone areas offered new insurance scheme

Affordable home insurance for householders in at-risk areas across the UK is now available through a new scheme launched by Flood Re, a joint industry and government sponsored scheme, it was announced on Monday.

Those households at highest risk of flooding will be given a choice of providers for affordable flood-cover under the scheme, which works with insurance firms to enable people who own and live in properties that are most likely to flood to shop around for home insurance more easily. The increased competition is expected to help drive down premiums for around 350,000 UK households, who have been paying large additional premiums to make sure their homes and possessions are protected.

Companies that currently offer policies backed by Flood Re are said to represent over half of the home insurance market, with further insurance firms expected to join the scheme. So far, the list includes Admiral, Aviva, Churchill, Direct Line, LV= and More Than.

Funded by an annual levy on insurers, the Flood Re scheme initiative takes away the flood risk element of insurance for an insurer and so keeps the cost of the policy down.  

The Association of British Insurers (ABI) reported that some insurers will be contacting customers directly to tell them about how Flood Re can make a difference. Consumers are also advised to call their insurer to find out if they can offer new options. In addition, the ABI also said it is also a good idea to shop around, as the existence of Flood Re should, over time, mean more choice of affordable flood cover.

According to the ABI, fully drying out, repairing and restoring a flooded home often costs between GBP20,000 and GBP45,000. Therefore insurance for properties which are likely to flood a lot often costs more and people who live in these properties have not generally had as much choice of provider.

Flood damage bills for storms Desmond, Eva and Frank, which occurred during December 2015 and over the new year are estimated to be about GBP1.3bn, including commercial customers and some vehicle claims as well as domestic property. Insurers expect to pay an average estimated payout for each domestic flood claim for these storms of approximately GBP50,000.

Commenting on the new Flood Re scheme, Huw Evans, ABI director general, said: “Being flooded is devastating, not only because of the immediate damage which is caused to homes and belongings but because fully drying out, repairing and restoring a flooded property can take months or even years.

“It is important as many people as possible have access to home insurance so they can get the money and expertise they will need if the worst happens.

“Insurers have worked flat out to design and fund Flood Re specifically to address the problem of high home insurance premiums. April 4 marks the start of a process which will re-energise the home insurance market in flood-prone areas and help ensure as many people as possible have access to effective, affordable cover for their properties.”