The following is an opinion article from Alan Osborne, head of product, insurance UK for LexisNexis Risk Solutions, looking at how the industry can come together to raise awareness of the rising flood risk in the UK.
Though the sun may be shining now, the UK has had a deluge of rain in recent weeks resulting in flooding in some areas. Flood damage can be traumatic for those involved, not just because of the initial damage but the disruption to life for weeks and months afterwards.
Ironically, this April not only happened to be one of the driest on record it was the one-year anniversary of Flood Re, the government-backed scheme to promote the affordability and availability of flood insurance for homeowners across the UK. The system works by placing the flood risk component of home property insurance with Flood Re, linked to property Council Tax bands.
The Flood Re reinsurance element sits in the background, helping householders access more affordable flood cover and a type of cover that for some homes in high-risk areas would be unattainable. LexisNexis Risk Solutions supports insurers in their use of Flood Re by incorporating Flood Re’s property data into the set of scores returned by the risk and location intelligence solution Map View, which is used to inform underwriting decisions. Map View is used routinely by the industry to determine a property’s exposure to flood – the addition of the Flood Re data set permits insurers to understand a given property’s eligibility for Flood Re and the cost of ceding.
One year on, the number of insurance providers signed up to the scheme has increased to 60 from the original 16. It is a world-leading scheme of its type and is helping the rising number of homes in the UK at ‘major risk’ of flash flooding – now estimated at five million potentially blighted properties.
The growth of Flood Re meant that by December 2016, the number of householders who had made prior flood claims (and could get quotes from two or more insurers) went up to 95% from 9% before its introduction. These figures come from a Flood Re commissioned benchmarking exercise.
Similarly, the number of householders who had made prior flood claims and were able to get quotes from five or more insurers went up to 84% from zero over the same period.
Since the introduction of Flood Re, four out of five householders with previous flood claims saw a reduction in the price of available quotes of more than 50%, according to Flood Re. The insurers participating in the scheme now represent 90% of the total home insurance market in the UK.
Holistic approach to flood risk
While this is good news, it is crucial that the whole insurance industry plays its part to raise awareness of the rising flood risk in the UK. Various participants in the UK property chain – local authority planners, government, housebuilders, the Home Builders Federation, data providers as well as insurers – could be doing more with holistic flood resilience, building design and physical protection measures.
It’s not possible to manage the entire risk out of the insurance industry. So insurers have an important role in educating consumers towards managing the risk and mitigating it: with measures like flood protection doors, membranes, raised electrical sockets, ventilation brick covers, sealed floors and raised damp-proof courses.
Some people may think that if they’ve been flooded once, then it won’t happen again. But the data represented in climate and weather trends and the risks of extreme weather events, suggest that this is not the case.
Severe flooding has occurred in 13 of the 16 years since 2000, with the worst floods in the north of England in 2015 costing the economy over £5 billion. There is so much to be done and Flood Re itself is slated to run for no longer than the next 20 years.
More can be done nationally on the macro-level. Meanwhile, on the micro-level, insurers have in the last few years strengthened their rating capability to assess flood risk at address level using tools such as Map View, a significant improvement from the previous norm which was to rate at postcode level.
Tackling flood risk requires a collaborative effort.The preceding article was composed by Alan Osborne, head of product, insurance UK for LexisNexis Risk Solutions. The views expressed within the article do not necessarily reflect those of Insurance Business.
Take into account natural infrastructure when pricing flood – Lloyd’
Flood Re: One year on