According to Environment Agency data, there are currently around 185,000 commercial properties at risk of flooding in England and Wales. While that may seem like a relatively low number compared to 5.2 million homes also at risk, many business owners have been left frustrated at the lack of availability in commercial flood insurance cover.
While the Flood Re scheme was launched for homeowners in April 2016, it wasn’t until December 2016 that the British Insurance Brokers’ Association (BIBA) announced a scheme for businesses. However, unlike Flood Re, the scheme for businesses has no government intervention and adopts a very different model.
The BIBA scheme is provided and managed by Randall and Quilter (R&Q) Commercial Risk Services, and uses advanced flood mapping data sets to provide a more accurate location of a property in order to calculate its flood risk as accurately and fairly as possible. It also takes into consideration any flood resilience measures installed at the premises to help lower premiums. The BIBA initiative is designed to allow businesses and landlords to obtain a full suite of flood insurance cover through a list of brokers; including buildings, contents and stock cover as well as business interruption insurance. However many businesses have reported that the premiums and excesses quoted under the scheme still remain too high and vastly out of reach.
So, what options are available to those businesses that can’t obtain or afford insurance premiums?
Improving your businesses flood resilience!
The first option would be to invest in some flood alleviation measures. Not only could it make flood cover accessible in the longer term, it may also help to prevent your business from flooding or massively reduce the downtime and damage caused if it does – potentially making a claim unnecessary. According to Flood Assist Insurance, on average every £1 spent on property level resilience provides a £5 saving on future damages, making the provision of flood insurance cover for your business a far more attractive proposition to insurers.
For businesses who can’t afford to stump up the cost at the current time, demonstrating to a potential insurer that you’re registered to receive flood warnings and have a solid flood plan in place may just help. Knowing your risk and taking steps to minimise flood damage to stock, equipment and key areas of the site can help to reduce the cost of any damage and subsequent financial liabilities to third parties as a result of a flood.
You can sign up to receive flood warnings here.
Tailored policy premium and excess values
Many insurers will offer the option of a lower premium at the expense of a much higher excess, or vice versa, to help obtain a more affordable premium without sacrificing the level of cover. However, careful consideration needs to be given to the likelihood, severity and impact of a flood event on the business and whether the company could stand to loose the cost of the excess in a potential claim.
Knowing your flood risk and having an idea of the potential cost to your business is essential in weighing up the best option, although some of the more intangible costs such as downtime, the potential loss of business, earnings and possible legal action through failure to fulfil contacts or orders, are somewhat harder to quantify.
It is worth noting though that comprehensive business flood planning can help to reduce these costs MASSIVLEY!
You can check your flood risk here.
Enquire about flood excess insurance
Often known as excess ‘buyback’ policies, excess insurance is an additional insurance premium which allows the policy holder to reduce the cost of the excess payable in the event of a claim on their primary policy. Unlike traditional excess ‘buyback’ policies, the industry now offers excess insurance policies directly to consumers whereby the cost of any claim on the primary policy is irrelevant. The value level of excess covered can vary under these products; however it is possible to find excess insurance cover up to the value of £100,000. These policies can be easily obtained online through third party companies and brokers.
While in some cases it may not cover the primary excess in full, it may just help to make obtaining flood insurance cover viable.
Having flood cover may not always be worth the cost; especially for smaller businesses capable of funding their own recovery and liability costs. The smaller and more predictable the loss, the more economical it may be for a business to self-insure. Knowing your flood risk and estimating the cost of your potential losses from a flood event is vital when understanding which approach may be the best solution for your business.
Setting aside money otherwise spent on the flood risk element of a policy ensures funding is available towards the recovery costs of a flood event as well as the cost of flood alleviation solutions; such as barriers and other mitigation options.
For more information and help on producing a business flood plan, click here.
Sources: BIBA, FloodAssist, Simply Business