Beyond Flood Re
The Future for Flood Re ?
Flood Re was put in place to offer affordable flood insurance to households in high flood risk areas. The scheme was enabled through the introduction of the Water Act 2014 and came into effect on 1st April 2016. The Flood Re scheme is designed to be a transitional measure which allows insurers to provide reflective, affordable premiums and excesses for high flood risk properties by the time the scheme finishes in 2039, as set out in the Flood Re 1st transition Plan 2016.
Reflective Pricing of Flood Insurance?
Properties in high flood risk areas are currently able to obtain cheaper flood risk insurance through Flood Re. However, if homeowners do not take action to lower the potential risk and cost of damage to their property, the industry will simply revert back to high cost premiums for high risk properties when the scheme closes in 2039 and the aim of providing reflective pricing will not be achieved.
Property flood resilience does not reduce the chance of flooding but can greatly reduce the cost and disruption caused by flood damage. However it is currently proving difficult to encourage home owners to install flood resilience measures as there is seen to be little incentive and many barriers for them.
When a ‘non-resilient’ property floods, the way forward is costly as insurers will dry out and reinstate ‘like-for-like’. In addition, there is also the added expense of paying for alternative accommodation while the resident is out of the property.
In contrast, if a ‘resilient’ property were to flood, then a wash down and clean up may be all that is necessary to allow residents to move back in; which is preferable to a total rip out and refurbishment of the internal fabric, making insuring the property much more attractive to insurers.
Therefore, those wishing to take advantage of the transitory period of security that Flood Re offers, may wish to better prepare their homes through the installation of products which are designed to keep water out, or help the property perform better in flood conditions.
From 2015-2021 the Government will spend £2.5 billion on flood protection schemes in the UK (www.parliament.uk). If homeowners were also to install measures that would help to lessen the effects of flooding to their properties, then the ‘reflective pricing’ that the Flood RE scheme aims to deliver should be more achievable when the responsibility for preventing properties from flooding is shared by agencies and property owners alike.
Quite often when areas flood, the comments and feedback from residents regularly include:
- “What is the Environment Agency/Government doing about it?”
- “Why don’t they dredge the rivers and clean the drains out more?” And;
- “There’s nothing I can do?”
Although they may be legitimate questions to ask, these responses put the emphasis and responsibility on others to protect our homes and businesses, steps must be put in place to incentivise homeowners to improve their resilience, as discussed in the recent Social Market Foundation Report by Matthew Oakley which asks what if:
- The existing grant scheme was improved and extended to make it more widely available
- Financial reserves from Flood Re were used to part fund grants / resilience installations for eligible properties.
- There was a change in building regs that stipulated flood resilience as part of any refit or refurbishment to properties in high flood risk areas.
- A “Flood Resilience Certificate” much like the Energy Performance Certificate was introduced
Consideration must be given to these ideas if there is to be any way of “Incentivising Household Action on Flooding”.
Source: Social Marketing Foundation