Several years ago we were asked to take part in a survey as to whether our clients faced difficulties obtaining flood insurance.
…At the time it wasn’t too much of an issue because of the ‘Statement of Principles’ agreement between the Government and insurance industry. But the survey didn’t ask the obvious question. If insurers are no longer obliged to provide flood cover under the agreement will the availability of flood cover be a problem?
The answer was pretty obvious, but because it wasn’t asked, we are now seeing the availability of flood cover for small businesses becoming a huge issue in some areas.
Under the ‘Statement of Principles’ agreement insurers agreed to maintain flood cover on homes and small businesses in all but the highest flood risk areas in return for the Government’s commitment for continued investment in flood defences.
However, with increasing concerns about climate change and the level of flood defence investment, insurers refused to renew the agreement and in 2016 it was replaced by Flood Re, a scheme funded by a £10.50 levy on all UK home policies. The scheme enables insurers to provide flood cover on most homes, but Flood Re does not apply to commercially owned property.
And that takes us back to the survey and the Government’s flawed analysis from which they concluded there was little evidence that affordable flood cover would not be available for small businesses in flood areas.
It was hardly rocket science to work out that once free of the obligations of the ‘Statement of Principles’ insurers would impose restrictions in areas they believe could flood in the future and complete exclusions or excesses of £50,000 or higher are now commonplace in higher risk flood areas.
It does not help that Government flood risk websites can frequently show an area as low or medium risk whereas insurers will say it is high risk. Insurers say they use sophisticated flood mapping tools, but many seem based on worst case scenario modelling and can defy logic given local knowledge. One property on a hill in Brighton really beggared belief.
There was a Government review in 2018 but it was based on a small 2017 survey before the problems we are now experiencing had really emerged and unbelievably less than 10% of the businesses surveyed were actually in high flood risk areas! They again concluded the lack of flood cover for small businesses was not a significant issue.
It appears the Government still hope that a solution will come from the insurance industry but as more insurers impose exclusions or restrictions this looks increasingly unlikely, and a Government backed scheme along the lines of Flood Re for businesses is possibly the only solution.
The Government are set to re-examine the issue by 2022 and this time will hopefully analyse the issue more thoroughly and realise the extent of the problem. However, small businesses need to get the issue of flood insurance on the Government’s agenda so if you are having a problem lobby your MP.
There are some possible solutions if you are having issues and more information can be obtained from the Flood Factsheet on the Nsure website.