News

Early insurer estimates indicate damage caused by the floods in Cumbria, west Wales, Dumfries and Galloway in late November could cost up to £100m.

Financial losses resulting from floods can be vast. In the summer of 2007, torrential rain and flooding caused widespread destruction resulting in 165,000 claims totalling £3 billion. The Pitt Review described it as the largest single claims event in UK history and the Association of British Insurers (ABI) recently stated that the cost of flood and windstorm damage will continue to increase as global temperatures rise.

Over 5 million people in England and Wales live and work in properties currently at risk of flooding from rivers or the sea. This News Alert provides practical advice to help those at risk prepare for a flood, minimise losses and deal with the aftermath.

Before a flood

1. Check your insurance

Homeowners should check their home insurance policy to ensure cover includes flood damage. It is also advisable to review the key features of the policy including any excesses you will be expected to pay in the event of a claim.

If you're approaching renewal, or if you're looking for a home insurance provider and you live in an area at risk of flooding, you can be reassured that cover is still available.

The statement of principles, agreed between insurers and the government, outlines the terms under which cover will be available in areas prone to flooding. The Association of British Insurers (ABI) defines the agreement as a commitment by UK insurers to:

• make flood insurance for domestic properties and small businesses available as a feature of standard household and small business policies if the flood risk is not significant (this is generally defined as no worse than a 1.3% or 1 in 75 annual probability of flooding).
• offer flood cover to existing domestic property and small business customers at significant flood risk providing the Environment Agency has announced plans and notified the ABI of its intention to reduce the risk for those customers below significant within five years. The commitment to offer cover will extend to the new owner of any applicable property subject to satisfactory information about the new owner.

It is important to note that:

• the premiums charged and policy terms will reflect the level of risk presented and are not affected by this commitment
• this commitment does not apply to any new property built after 1 January 2009: the ABI encourages developers and customers purchasing a property in a new development to ensure that it is insurable for flooding.

The agreement will remain in place until 30th June 2013.

If you’re currently looking for a home insurance provider, and your property is located in an area prone to flooding, check the insurer’s approach to the following before making a choice:

• replacing damaged goods
• covering alternative accommodation costs
• flexibility in choice of tradesmen/suppliers
• available optional covers 
• limits and exclusions
• excesses
• specified single articles amount.

It is also vital for companies to regularly review insurance cover. The Pitt Review found that under-insurance was a major problem in the floods of 2007, particularly for businesses.

Most organisations will have business interruption cover but a full review of the gross sum insured and the indemnity period should be frequently undertaken. This isn't just a question of insuring flood as a peril, denial of access and loss of attraction may have an equally disastrous impact on business.

If the nature or organisation of your business is complex, you may need expert advice from a specialist surveyor to review your requirements and help calculate the gross profit sum insured.

2. Understand flood warning codes

The Environment agency uses four codes:

• Severe Flood Warning – Severe flooding is expected, there is extreme danger to life and property. Act now.
• Flood Warning – Flooding of homes and businesses is expected. Act now.
• Flood Watch – Flooding of low lying areas is expected. Be prepared.
• All Clear – Flood watches or warnings are no longer in force in this area.

Warnings are published on the Environment Agency’s web site at www.environment-agency.gov.uk/ and in the media.

Homeowners and businesses in high risk areas also have access to Floodline Warnings Direct, a free service that provides flood warnings by telephone, mobile, email, SMS text message and fax.

Simple advice on what to do, before, during and after a flood is also available from Floodline on 0845 988 1188 and Typetalk 0845 602 6340.

3. Plan and prepare

For homeowners, the Environment Agency provides a template flood plan. Use the link at the end of this article to download the plan from their web site.

Your flood plan should include:

• your insurer’s contact details and relevant policy numbers
• contact details of specialist flood protection companies in your area
• alternative accommodation details
• telephone numbers and addresses for furniture storage facilities
• contact details for furniture restorers.

Where possible, take photographs of possessions and keep these with your plan. It is advisable to store your plan electronically, ensuring there is a back-up and that it can be accessed remotely.

For businesses, flood should be one of the events considered in your business continuity plan. The Environment Agency warns businesses to prepare contingency plans. Most businesses can save between 20% and 90% on the cost of lost stock and movable equipment by taking action in advance.

Business continuity plans should be site specific and the level of complexity and detail appropriate to the company. Plans should be reviewed regularly to ensure they are still relevant and tested and rehearsed to evaluate effectiveness.

A relevant and up-to-date plan will demonstrate to insurers and lenders that you’ve taken a proactive approach to risk management and can help stabilise the cost of your insurance in the long term.

4. Manage the risk

For homeowners, there are simple things you can do to protect your treasured possessions and home contents, such as moving belongings upstairs or to a higher point in the property. You can also use plastic covers to seal airbricks and sandbags to create water barriers. Reuseable floodboards can also be fixed to door and window frames.

The Environment Agency advises on more permanent measures including laying ceramic tiles instead of carpets on the ground floor, raising the height of electrical sockets to 1.5 metres above ground floor level, using lime plaster instead of gypsum on walls, fitting stainless steel or plastic kitchens instead of chipboard ones and fitting non-return valves to all drains and water inlet pipes.

Regularly checking roofing, guttering, drainpipes, drains and water storage tanks to detect and repair damage early is also advisable.

Businesses should implement a system of checks as part of a risk management programme, including regular inspection of gutters, pipes and plumbing and periodic checks that all stock and key items of equipment are at least 150mm off the floor. In addition to this, keeping supplies of permanent or semi-permanent flood protection products will enable you to act quickly to protect your property from potential damage.

After a flood

The ABI, Health Protection Agency and Environment Agency provide advice for home and business owners dealing with the aftermath of a flood, including the following key points:

• Contact your insurer as soon as possible.  Most home insurance providers offer 24-hour emergency helpline services to arrange for repairs to be carried out and damage to be inspected.
• Avoid walking or driving through floodwater. The Health Protection Agency states that the main threats to health during and immediately after a flood are drowning and injuries caused by accidents in flowing water. Six inches of fast flowing water can knock you over and two feet of water will float your car.
• If your property or workplace is flooded make sure the building is safe before you enter and ensure electricity and gas supplies are switched off.
• Do not use electricity or water supplies until the ‘all clear’ is given.
• Keep the number of people entering the building to a minimum. All people involved in cleaning should wear protective clothing and business owners should ensure health and safety procedures are adhered to.
• Most home insurance policies will cover the cost of alternative accommodation, up to a specified limit, if you need to move out of your home while it is being repaired.
• Once flood water has receded, disinfect floors and furnishings. Where practical, leave doors, windows and cupboards open. If possible, keep rooms heated. The Health Protection Agency provides advice on cleaning up after flooding on their web site at www.hpa.org.
• If necessary, arrange for temporary repairs to be carried out to stop any damage getting worse. Keep receipts, as these will be needed for your insurance claim.
• Always make your own record of flood damage – photograph or video record your damaged property and list your property and belongings.
• Do not rush to redecorate, as it may take some weeks for the property to fully dry out.
• Comprehensive motor insurance will cover flood damage caused to vehicles. Motor Fleet and Commercial Car/Vehicle policies will indemnify against flood provided Comprehensive cover is purchased. If you have a number of vehicles stored at your premises at any one time, you may want to move them to a different location or higher ground to minimise losses.

For further information visit:

• Health Protection Agency - http://www.hpa.org.uk/
• Environment Agency - http://www.environment-agency.gov.uk/

• The Association of British Insurers - http://www.abi.org.uk/

Contacts

If you would like to discuss your home or business insurance and risk management needs, please call your usual Perkins Slade contact or dial 0121 698 8000 to speak to a member of the Private Client or Corporate team.

Sources

• The Pitt Review: Lessons learned from the 2007 floods
• Flooding and your insurance Claim, BBC News, Business, 23rd November 2009
• Health Protection Agency - http://www.hpa.org.uk/
• Environment Agency - http://www.environment-agency.gov.uk/

• The Association of British Insurers - http://www.abi.org.uk/

Whilst every care has been taken to ensure the accuracy of the contents of this publication, the information is for general guidance only.