Sorry for the horrendous title. I would usually go for an amusing pun but given the serious nature of the topic I can’t bring myself to think of one.
Unless you have been abroad or on the moon since December you can’t help but have noticed the severe weather the country has experienced causing all sorts of damage. The most powerful effect of these storms has been flood – the more southern counties bearing the brunt. Fingers are being pointed all over the place but the truth is that no one can control the weather, not least the government or insurers.
So what happens now? With around 6,000 properties affected by flooding across the southern counties and Thames areas we have, unsurprisingly, seen a number of flood and storm damage claims over recent weeks with varying degrees of severity. In each case we have noticed insurers straining to keep up with the management of these claims. Although we can all see weather reports I think the severity and the longevity of the weather has taken everyone by surprise and Insurers are working extra hours and employing additional loss adjusters to get things moving quickly.
You also cannot help but have noticed the plethora of politicians in wellingtons wading through communities to demonstrate their concern. In a rather unhelpful gesture Leader of the Opposition Ed Miliband waved his knowledgeable hand and decided it prudent to suggest the Government put pressure on insurers to pay claims quickly. What it seems Mr Miliband does not appreciate is the existing pressure insurers are to manage these claims and actually it is already in the insurer’s interest to pay claims quickly or to make interim payments in order to ease their burden. What the government are quite rightly concentrating on now is the practical assistance that can be given, the army are getting their hands dirty… or rather ‘feet wet’ as are numerous other public services in an effort to assist residents. Also in the forefront of their mind is how the clear-up operation will be managed. It is not going to be an easy task and many local authorities have already had their wrists slapped by government for ignoring environmental health issues where sewerage is escaping or even charging residents for sandbags.
So what is the outcome for insurers? Well like all things time will tell. In the wake of 9/11 Terrorism insurance was taken away from insurers and a central pool set up for that particular type of cover. That was an extreme and catastrophic incident for a group of particular insurers and so could not be ignored. The flooding in this country is a little more spread out and so no one insurer is disproportionately affected. What I believe we will see moving forward is insurers using a more complicated and thorough system for ascertaining whether someone is at risk of flooding. I suspect that, like subsidence, flood will now necessitate a higher excess and I imagine that the peril of Flood and possibly Storm will now be an optional ‘buy in’ rather than standard cover – particularly in certain areas.
What we also might find, which already happens to a certain extent, is that insurers will have a certain capacity per postcode. That is to say a single insurer will not want to insure an entire post-code or area. Many insurers are careful about city centre risks already. You might recall the Bunsfield incident where there was a large explosion at an industrial complex. Many insurers had huge claims as a result because they insured entire streets or developments locally. The recent weather will only serve to highlight the risks that insurers face in providing ‘too much’ cover in a certain area.
What is certain is that the damage caused and claimed for this winter is likely to have an impact on future rates. Where does this leave you as a client? I really think this is where the value of a broker comes into play. With constant exposure to the market we can monitor and sometimes foresee changes in insurer’s attitudes and so will be in the best position to make sure you have the cover you need at a fair price. Ultimately providing you with the peace of mind that you need.
