Flood Re, an exciting new scheme to help ensure affordable home insurance for everyone, has been running for just over a year now – so how has it fared?
Flood Re is a joint Government and insurance industry initiative with the aim of ensuring that home insurance is available and affordable for homeowners countrywide – especially in areas hit by recent flooding. Residents of areas affected by flooding were finding it impossible to find home insurance at affordable prices, and premiums and excesses had rocketed for those in affected regions. Many were facing the prospect of having to go without insurance – putting them at risk of devastation if they were to be hit by flooding again. It was out of this tricky situation that Flood Re was born.
Prior to launch, Flood Re commissioned a benchmarking exercise to examine the impact on availability and affordability of flood cover. The research by Consumer Intelligence, a specialist in customer satisfaction and insight in the financial services sector, showed that:
- Before the introduction of Flood Re, only 9% of householders who had made prior flood claims could get quotes from two or more insurers, with 0% being able to get quotes from five or more
- By December 2016, this increased further so that 84% could get quotes from five or more insurers while 95% could get quotes from two or more
- Four out of five householders with previous flood claims saw a reduction in the price of available quotes of more than 50% after the introduction of Flood Re
Like all reinsurance schemes, Flood Re insures the insurers against losses – in this case, losses incurred by extreme flooding events. Insurance companies must now pay into a central fund, totalling £180 million every year, and by doing so can pass on the flood risk aspect of home insurance policies in at-risk areas to the Flood Re scheme. The companies are then reimbursed for any claims payments they make for flood damage for houses in the scheme. This has allowed insurance companies to reduce the premiums and high excesses that had previously dogged customers in flood hit regions.
It is worth highlighting, however, that homes built after January 1st 2009 are excluded from the scheme, as are businesses and buy-to-let properties. This is because the scheme is currently aimed purely at helping homeowners, rather than owners of commercial property, and does not cover newer properties which should have been constructed in lower risk areas.
We are now a year into the rollout period for Flood Re. Already, more than 50,000 homes (out of an expected 350,000) have been insured under the scheme, relieving many worried homeowners of the burden of not being able to afford insurance.
The Telegraph features one such homeowner: Jeanette Shipp, whose Surrey home was flooded on Christmas Eve 2013. She had struggled to find affordable home insurance since – with prices in the thousands. However, since the scheme has been implemented, ‘Policies were available for as little as £425, with much lower excesses than had previously been available.’
“Flood Re has helped tens of thousands of households in flood risk areas across the UK to access more affordable flood insurance, where before, they couldn’t”, Dermot Kehoe, Director of Communications and Transition at Flood Re, comments. “We have seen how flooding can devastate homes and families and I’m proud that the scheme has changed the market and helped so many people in its first year in operation.”