A controversial new scheme designed to let home insurers offer affordable cover to the 350,000 UK homes at high risk of flooding is to be launched.
Flood Re, which claims to be a world first, received the final go ahead from financial regulators last week, and on Monday will start accepting the first premiums and offering cover to householders.
The scheme, which is largely being paid for by a levy on all home insurance policyholders – £10.50 on average – will offer subsidised insurance for some households especially vulnerable to flooding.
Flood Re was developed following government intervention after insurers said they were no longer prepared to offer universal flood cover. Billions of pounds have been paid out by the industry in recent years following a series of devastating flooding events, particularly in the north of England.
From Monday, house insurers will be able to pass on the flood risk of the policy to Flood Re. The householder would have the price of the flood element of their policy fixed according to the home’s council tax band. A homeowner in band Awould pay £210 a year for buildings and contents flood cover, rising to £1,200 a year for a large band H residence.
So far, around half of home insurance firms have signed up to the scheme, although more are expected to follow in the coming weeks. Householders in high flood risk areas may have to switch to an insurer that is part of the scheme if they wish to benefit.
For some homeowners – particularly those living in Cumbria, which has been badly affected by flooding – it would mean the return of affordable cover.
The scheme has proved controversial because, while it will include riverside mansions, it excludes thousands of other, more modest properties such as leasehold flats and homes that are let.
Small-business leaders have been left angry and frustrated that shops and other small-business premises are not included. Blocks of flats or even those housing association premises are not eligible. The scheme is backed by £2.1bn in reinsurance cover.
Brendan McCafferty, chief executive of Flood Re, said its introduction should make flood cover more affordable and accessible over time.
James Dalton, general director of the Association of British Insurers, said there was no rush to take action today, as the “benefits of Flood Re will develop over time”.
“If your policy isn’t due for renewal yet, you may find an even greater choice of cover when you are ready to renew in a few months’ time,” he said.
Despite that, plenty of insurers have been keen to quickly move customers on to the scheme. Axa said last week that it was contacting all customers in flood risk areas who had bought a policy since January to encourage them to cancel it and move to a new, Flood Re-backed policy – penalty-free.
Source: The Guardian