Concerns inaccurate flood risk data could make safe areas uninsurable

Jonathan Willett

A Teesside insurance broker fears that flood risk mapping and data could price small businesses in safe areas out of the insurance market.

In the wake of the recent devastating floods, the accuracy of maps, compiled by the Environment Agency, showing the likelihood of areas across the UK being flooded – information which is used by insurance companies to make decisions on cover and premiums – has come under scrutiny.

Jonathan Willett, a Director at Henderson Insurance Brokers Teesside office, said: “The trail of destruction left in the wake of the recent storms has turned the spotlight on flood risks in different areas of the country and how it impacts on the availability of affordable insurance.

“it is vital that data compiled by the Environment Agency and insurance companies, which often have their own programmes and criteria to assess flood risk, is regularly scrutinised to ensure it is up-to-date and completely accurate.

“Stokesley, for example, has not flooded for years, but is classified as high risk by some insurers. This means that policy premiums and claim excesses are needlessly inflated and could mean that relatively safe areas become an insurance exclusion zone for small businesses.”

In a recent national radio interview, in response to a question about the accuracy of its mapping, an Environment Agency representative replied that in some places it needed to continue to improve.

The Agency also said it was looking at ways of speeding up the gathering of information and the passing on of it to insurers.

Mr Willett also is calling for a not-for-profit fund to help households at high risk to obtain affordable flood insurance to be extended to small business owners.

The call comes as many owner-managers whose premises have been flooded by the recent storms battle to keep their businesses going.

The not-for-profit- flood reinsurance fund, called Flood Re, which is due to launch in April, is a collaboration between the insurance industry and the Government and will cap the insurance of home owners in flood-prone areas. It will be funded by a levy of about £10.50 on all household premiums across the country.

According to the Flood Re website, ‘small and medium enterprises and leasehold properties are not included because there already is an effective and competitive property insurance market covering them. Neither the Association of British Insurers, nor the Government, is currently aware of any evidence to suggest that affordable flood insurance will cease to be widely available for them in the future and discussions are ongoing’.

However, Mr Willett disagrees. “Small businesses in high risk areas, which have suffered the devastation of flooding for the second or third time in less than a decade, will struggle to obtain affordable insurance,” he said.

“We all have seen the grim images of business premises feet deep in dirty water and devastated owners ripping out beyond repair fixtures and fittings. Business owners also have talked about not having insurance because quotes for premiums had gone up tenfold or huge excesses, in some cases comprising 25 percent of a claim or £10,000, which ever was the higher, had been mooted. That sort of financial outlay understandably is beyond some small businesses.

“We know from experience that it can be difficult, if not impossible, to get affordable insurance or, indeed, any flood insurance cover at all in areas that regularly flood or are classed as being at high risk.”

 

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