Today marks a year since the Flood Re scheme was introduced on April 04, 2016 – a significant moment for the industry.
The scheme has allowed insurers to provide affordable home insurance to those in areas with a high-risk of flooding, by shouldering the flood risk element of home insurance away from insurers in return for a premium and an annual levy – set at a total of £180 million per year, split between insurers.
The current plan is for the scheme to be in place until 2039, during which time it aims to smooth a transition to a free market in which home insurance prices ‘fully reflect flood risk’.
Success of the scheme
In its first six months of operation, the scheme took on over 53,000 policies in the domestic market, and, at the beginning of this year, Flood Re announced it was on track to take on 130,000 policies by its first anniversary.
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Iain Hamilton, head of home insurance pricing and underwriting at Aviva
, said the Flood Re scheme has not only enabled homeowners in the highest risk areas to enjoy greater access to insurance, but importantly means that many are now able to shop around for the first time.
“Since launch, Aviva has transferred 16,000 customers to the scheme, with new customers in the highest risk areas saving an average of £500 on their premiums,” Hamilton said in an email to Insurance Business.
“We’ve been helping customers in some of the worst flood areas across the UK benefit from the scheme, including the Humber, Lincolnshire, Yorkshire and tributaries of the Thames in the home counties.”
Domestic vs. commercial
But while many homeowners are feeling the benefits, small and medium enterprises (SMEs) are deliberately not included in the scheme, thanks to an already competitive property insurance market.
There is, however, a British Insurance Brokers’ Association (BIBA) commercial insurance scheme which aims to improve the ability of SMEs and property owners to find suitable flood insurance.
As part of the scheme, BIBA has made calls to the government to roll out a wider system of grants to small businesses that it says would enable them to take property-level flood resilience measures.
The calls are supported by research from the association which reveals that 67% of brokers believe it would be easier to place the insurance risk if their clients had access to such a grant.