As 2015 gets closer, so does the implementation of the Flood Re scheme – an agreement between the government and the insurance industry allowing flood-prone homes to be able to buy affordable home insurance. This scheme aims to cap annual premiums, and payment for flood damage will come from a central pool of money not an individual insurer.
Homeowners on flood plains, including many locally in Sussex, will be covered by this scheme, as long as their property is not within council tax band H. The flood part of their premium will be capped from 2015 – if other risk factors change however, these will not be fixed. Many policyholders have seen their insurance premiums rise as a foresight to this – to cover both the cost of this subsidisation, and the cost of this year’s flooding.
As aforementioned, band H council tax payers are excluded from the Flood Re scheme. This means that they could see their flood premiums rise by a sum above the cap, and even find that their homes could become uninsurable. This is far from ideal and could lead to the value of their homes dropping, due to mortgage lenders only offering loans on buildings which are covered by buildings insurance.
It’s not just band H council tax payers who are excluded from this scheme – if your house has been built since 2009, you are also not covered, nor are properties owned by buy-to-let landlords, holiday lets, and leasehold properties. The Association of British Insurance says that this post 20009 property exclusion is designed to “to avoid incentivising building in flood risk areas”, but that still leaves a lot of people who rent their properties in a difficult situation.
If you’re a tenant, or live in leasehold property, there is a necessary reason to worry. Estimations from the British Property Federation show that 840,000 leasehold properties are estimated to be at risk of flooding, and 70,000 of these are deemed to be at a high risk of flooding. If tenants have landlords who are unable to get affordable insurance, then they could face problems if their property ever suffers from flooding. Of course landlord insurance policies normally cover re-housing costs, but the Residential Landlords Association says that members may have to pull out of the sector as a result of these changes.
So results of the Flood Re scheme is that insurance premiums will likely rise for many, plus landlords may choose to sell their properties so that they do not fall foul of these changes. This agreement favours the insurer and people will struggle to buy affected properties, or purchase new policies. The insurer will benefit from less risk and although they say that this allows consumers to move around to get the best deal, it will leave many without a policy, or one which fails to cover all of their needs.
Whether you live on a flood plain and are facing not being able to purchase an affordable policy, or face paying extra on top of your premium to cover those who do, this scheme seems to only benefit the insurer. As loss assessors, here at ICS we work for the consumer. We know and understand how devastating and mentally damaging suffering from flooding can be, so to have this as an additional stress is not something to be taken lightly.