As many Landlords and small businesses continue to fight to recover from severe flooding and rainfall which was described by the MET Office as “the most exceptional for 248 years”, our thoughts start to turn to the future and the cost and availability of business insurance protection.
Floods cost small businesses £831 million
The Federation of Small Businesses has published research showing an average cost of £1,531 per business in flood-hit areas amounting to a total of £831 million.
Some areas of South West England were still suffering from flooding up to three months after the first initial flood warnings, and the impact on businesses has been significant.
The FSB's flood research shows a third (32%) of small firms in flood-hit areas suffered from reduced demand for goods and services, while transport disruption hindered the movement of goods and supplies (29%) and led to staff absences (16%) in many businesses.
Insurance losses estimated at £1.2 billion
Rating agency Fitch has reported that the UK floods are estimated to cost the insurance industry £1.2 billion in claims, with the Association of British Insurers indicating that adverse weather claims in Q4 2013 were the highest for 10 years.
What does this mean for insurance premiums?
The very nature of insurance is to protect individuals and businesses against unexpected losses, as such insurance companies generally underwrite a diverse portfolio of business to protect themselves against significant claims in one region or class of business.
However, at an individual level, it is likely to impact affected areas, and individual businesses could see increased business insurance premiums or find it more difficult to obtain alternative quotations.
The FSB remains concerned that as a result of the floods, small businesses will find it more challenging to obtain business insurance.
More than a third (37%) of FSB members in flood-hit zones expect it to be more difficult to renew their small business insurance and more than half (59%) expect their insurance to become more expensive as a result of being left out of the Flood Re support scheme.
What is the proposed Flood Re Scheme?
Flood Re is a Government led not-for-profit fund which will work in conjunction with UK Insurers. The proposed arrangements the cost of flood cover will be capped and made available to homeowners in Council Tax brackets A to G to ensure that areas more susceptible to flooding can obtain cover.
As the flood element of cover is funded to Flood Re, competition in the market will still exist across insurers avoid artificial price inflation. To ensure adequate funding, insurers will make a levy payment across all qualifying policies into the scheme.
What do the Government proposals mean for businesses?
The Flood Re proposals are welcomed providing huge relieve to homeowners, BUT, and it’s a big BUT, current proposals make no allowance for either Business, Commercial or Let Property insurance, which many believe could leave small businesses severely exposed.
John Allan, National Chairman, Federation of Small Businesses, said:
"We also know small businesses are worried they will find it increasingly difficult and considerably more expensive to insure their businesses. Certainly, the evidence we have from our members points to small businesses' exclusion from the Flood Re scheme being unhelpful. We want the Government and the insurance industry to look again at the support they have in place for small businesses in flood-hit areas and see whether there is more help they can provide to ensure they have access to adequate and affordable insurance."
Can we do anything to help?
Absolutely! The aim is that Flood Re will come into effect in the summer of 2015, the business community must make its voice heard as a collective and presses for the inclusion of business and let property to be included within the fund.
One of our insurer partners, Hiscox, has already called for the Government to address the loopholes, Bronek Masojada, chief executive of global insurer Hiscox, said:
“Flood Re is great for Britain in concept, but the Government’s proposals fall short in practice. An urgent rethink is needed. We absolutely support a sustainable, mutualised solution to the problem of insurance, but the Government must listen to growing concern from insurers and the public.”
At Insync, we will actively support Flood Re principles, but it is vital that small businesses are not ignored, we urge every SME business owner to lobby their MP and take a stand.
Sign & share our Government E-Petition to support a review. If we can achieve over 100,000 signatures the matter will be considered for debate in the House of Commons!