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.