It seems that things are on track for what could be called Flood Re 2. According to recent reports, a new scheme to extend Flood Re to cover businesses is likely to be launched in the autumn. It’s not good news for all businesses: it seems that only smaller businesses will be covered, but precise details have not yet been announced.
We reported back in January that this winter’s floods had hit businesses particularly badly, and many weren’t covered by insurance because it was too expensive. While Flood Re, which came into force in April, offers affordable flood insurance for homeowners, businesses aren’t covered. But sustained pressure from interest groups led to a U turn on this and so we now await ‘Flood Re 2’.
But however effective Flood Re 2 turns out to be, it won’t help if businesses haven’t got the correct insurance in the first place. A business insurance expert has recently written about what to consider when buying commercial insurance, which can be summarised as follows:
- Think about what you actually need for your business – it’s not a question of one size fits all. For example, many off-the-shelf commercial policies include high levels of travel insurance which is absolutely pointless if you rarely travel long distances.
- Don’t necessarily go for the big insurance names. Many smaller insurers offer excellent cover. What’s important is to do your research and compare the policies on offer carefully. If they’re available, read case studies of businesses which have been helped by insurers in the past.
- You don’t have to have all your cover with one provider: you could have a mix of different insurers. Match the relevance of different aspects of the cover on offer to your specific business needs.
If you have complicated needs, then it’s probably best to get expert independent advice on which policy is the best for you. Business insurance is far more complex than residential cover and needs to include items such as business interruption. We’ve written a guide to this, which explains what it is and what it should cover. And in the event of needing to make a claim, one of our specialist commercial loss assessors is only a phone call away.
So it’s finally happened! Flood Re has gone live. It’s taken four years to get to this stage, and there have been times when it looked as if agreement would never be reached. But it’s here: affordable flood insurance is now available for the vast majority of the population.
Flood Re operates by charging a small amount extra on all our buildings insurance, which will be on average £10.50. This is then used to create a fund which will be available to insurers should flooding strike. So people in high-risk areas will no longer either have to pay huge insurance bills or be denied insurance cover altogether. And the excess on their policies will also be capped at £250.
There are still exceptions however, most notably businesses, rented properties and homes built since 2009. This has led to many objections to Flood Re, and these rumble on. Indeed, only last week we reported that there are rumours of a Flood Re 2 to cover excluded properties, in particular those in the private rental sector.
But whatever the issues around Flood Re, it is fantastic news that it’s now up and running.
And so it’s April 2016….the time has finally arrived when Flood Re is supposed to launch. But will it? We still don’t know for sure.
In the meantime, there are new demands from groups who feel let down by this complicated scheme for affordable flood insurance. The latest to issue a statement is the Residential Landlords Association (RLA). Flood Re excludes businesses and therefore does not cover properties in the private rental sector as buy-to-let homes are considered a commercial undertaking.
The RLA believes that up to 100,000 properties could be at risk from lack of affordable insurance: “We are firmly convinced that, once we move into the new era of Flood Re, more and more private landlords and those in other excluded groups will find it impossible, very difficult or costly to obtain the necessary flood coverage.”
The RLA is therefore asking for a ‘Flood Re 2’, which would extend the scheme to cover excluded groups including landlords, flat owners and small businesses. A spokesperson made a very interesting comment when you consider how long it’s taken to get to this point: “A great deal of experience will have been gained in setting up Flood Re. Therefore it should not take as much time, trouble and effort to create a second version.”
As we mentioned before, there are still problems which could delay the launch of Flood Re. The thought of going through it all again for Flood Re 2 fills me with dread.
There’s been a lot of news about flood insurance and flood defences over the last week: here’s a round up.
Firstly, there was good news and bad news in last week’s budget for the insurance industry. First the bad news: insurance premium tax (IPT) is rising by 0.5 per cent to 10 per cent, only a few months after a 3.5 per cent hike. The good news is that this was less than the insurance industry feared – but also that the proceeds from this latest rise will be added to government funds to improve flood defences in the most at-risk areas of the country.
But some people in the insurance industry weren’t happy, particularly as every type of insurance will be hit – even motor insurance. In the home insurance market, there are fears that yet another rise in IPT could put people off from taking out insurance and leave them exposed if something happens.
Meanwhile, we are only a couple of weeks away from the launch of Flood Re, which aims to provide affordable flood insurance for households across the country. But according to reports in the press over the last few days, there are still two issues hanging over its launch: one around regulatory approval, and the other around software for brokers. Who knows whether it will actually go live in April: we wait with bated breath and will of course report back.
Finally, one of the key gripes about Flood Re is that is doesn’t cover small businesses. However, the British Insurance Brokers Association announced last week that it is looking at launching sometime this year a scheme similar to Flood Re for small businesses. That really is good news.
One sign that Flood Re is nearly with us is that there is now an official website. This explains in detail this new scheme for affordable flood insurance which will start in April. It’s been a long time coming….but according to many it’s still a long way from perfect.
The most common objection to the scheme is that it excludes cover for businesses. This has risen to the top of the agenda during the recent floods in the north of the country as they have hit businesses particularly badly.
By coincidence there was an Adjournment Debate last Monday in the House of Commons entitled ‘Availability of flood insurance for businesses’. The debate was tabled by Craig Whittaker, MP for Calder Valley where many businesses were badly affected by flooding in 2012 and were then unable to afford the flood element of their insurance. Some of these have been hit again by the recent floods and several have now folded. Mr Whittaker focused among other things on how vital these businesses are to the very existence of the communities affected.
The response from Rory Stewart, Under-Secretary of State for Environment, Food and Rural Affairs, offered some explanation for the exclusion of businesses from Flood Re. In a nutshell, having a commercial version of the scheme is seen as unworkable because of the complexity of business insurance. It’s not as simple as residential insurance which is primarily for just two types of cover: buildings and contents. Some businesses, particularly in the service sector, may not need, for example, high levels of business interruption insurance: they can move and set up elsewhere quite quickly. Others with high levels of stock or equipment, or if they’re location-dependent, need far higher levels of cover and face far longer before they can resume trading. So there is a huge challenge in working out how much each type of business should contribute to such a scheme.
But the Minister ended on a positive note, flagging the fact that there is a roundtable this week which will bring together various insurance industry bodies and representatives of small business to look at the issues involved. His final words were encouraging: “We will, through the roundtable and through the weeks ahead, look relentlessly and vigorously at the costs and benefits, economic and social, which are involved in failing to provide adequate business insurance.”
We will report back.