Flood Re FAQ
Apr 1 2016
With Flood Re’s launch on 4th April 2016, Mary Dhonau provides the answers to several questions that she is frequently being asked about the scheme.
1. What actually is Flood Re?
Flood Re is a reinsurance scheme that is being launched to help provide access to affordable insurance cover for the homes that are considered most ‘at risk’ of flooding – an estimated 350,000 properties. It will do this by spreading the cost and risk across the entire home insurance industry and will be funded by insurers.
2. Who is paying for Flood Re?
Insurers will pay Flood Re a fixed levy (a tax) each year, in addition to this insurers will also pay Flood Re a fixed amount for each policy they pass to the scheme. That amount is set by council tax band. In the event of a claim, Flood Re will also charge insurers a £250 excess. Insurers can charge higher excesses although they don’t get to keep that money in the event of a claim being made. How those costs are met is up to each insurer to decide. Some may absorb the levy whilst others may pass this onto their customers. Flood Re does not set pricing; insurers do, so it is important that consumers shop around for the best policy available to them.
3. Are there any properties that are not covered by Flood Re?
There are a few exclusions that you need to be aware of. For example, properties built after 1 January 2009 are not eligible, in addition to blocks of residential flats or Bed & Breakfast premises that are paying business rates. A full list of eligible properties can be found at the Flood Re website at www.floodre.co.uk/eligibility.
4. Will I have to use certain insurance companies to qualify for Flood Re or apply to join Flood Re?
No, you will simply be able to purchase insurance as you do now and there is no need to contact Flood Re directly for any reason. If you make a claim at any stage in the future, you simply contact your insurer as you would do now and they will work with Flood Re, who will reimburse them for any payment they make as part of your claim. What’s more your insurer doesn’t have to wait for Flood Re to pay out before they will start putting things right in your home. You will simply benefit from more accessible and affordable household insurance as a result.
5. Will I see a big change in insurance prices immediately?
This will depend on which insurer or insurers you ask to give you a price. Some insurers will be changing their pricing structure quicker than others. Insurers won’t automatically move customers to new Flood Re-compatible policies. So it’s important you look for the right cover for you – that means checking the price and what the policy provides.
6. This is all very good, but shouldn’t we instead be looking more towards ‘prevention’ of flood, rather than a ‘cure’?
It’s important to have both – flooding is one of the largest natural risks that our country faces; as part of the Budget the Chancellor announced a £700m boost to resilience and flood defence schemes in York, Leeds, Calder Valley, Carlisle and across Cumbria. This was coupled with the availability of £5,000 flood resilience grants for those affected by the awful winter floods. Ongoing support of this nature will of course be needed so physical defence schemes can be created to help communities at real ongoing risk.
On top of this, we need to be mindful that flooding is a sad reality and where possible homeowners, and also developers of new homes, need to be aware of the flood resilience or resistance measures that can be taken at the property-level so if or when a flood happens, they are better prepared. Flood Re is still very much needed to be able to support homeowners in being able to access the affordable and appropriate insurances they need for if the worst does actually happen.
We can’t always stop flooding from happening, but Flood Re should ensure that if all else goes wrong, home insurance is still there for them to be able to pick up the pieces afterwards.
7. Will I be told if I’m going in to Flood Re?
Yes, if on taking out new insurance and the insurer decides they need to transfer the risk into Flood Re, at that stage your insurance company will make information available to the customer to let them know that this has happened and explain what Flood Re is. I’m sure people will become much more aware of Flood Re in due course as it will be in place until 2039.
8. Can I get advice on what flood resilience measures would work for my home from Flood Re?
Flood Re will provide links to specialists that you can contact – it won’t be directly giving advice to the public – however there are many organisations out there that can help. For example, the Know Your Flood Risk campaign, the Environment Agency and the National Flood Forum – all of which are well equipped to provide support and guidance to those looking for advice. This includes a free helpful guide which is available to download from the Know Your Flood Risk website, which provides a huge amount of guidance and support on resilience and recovery.