New Home Flood Insurance exclusions

Flood Re only covers owner-occupied homes built before 2009 that are worth less than £320,000…

The Flood Re 2015 scheme is a public relations disaster waiting to happen for the insurance industry, according to Insurance expert Hiscox chief executive Bronek  Masojada.

Speaking to the Insurance Times he said “The risk is that there will be a PR disaster the next time there is a big flood. We need to decide where we are going to pitch Flood Re. At the moment we are pitching it as a solution for all at-risk properties but actually it won’t be. It is in that gap between what you say and what you do, that you have the reputational hit.”

One of the arguments against including higher-value properties, such as those in council tax band H, is that it will push up the cost of Flood Re, potentially meaning that all households will have to pay a higher levy than the proposed 2.2% of annual household insurance premium per property.

Masojada contends it is unfair to exclude band H homes because although they only make up around 0.6% of homes in the UK, they will pay around 6.5% of the total levy without getting any benefit from Flood Re.

He acknowledged that including band H properties could push the cost up, but to counter this, Hiscox proposes capping claims per home at £160,000. He said this would comfortably cover the claims for lower-value properties and would allow those who expected claims above the cap, to top up their coverage in the open market if they wanted.

The proposed cap could also prevent more homes falling outside the scope of the scheme if the government decides to revise council tax bands later. The bands were set in 1991 and are considered ripe for change given the sharp rise in house values in recent years.

Masojada also said it was wrong to assume that band H houses produce the biggest claims. He said: “We have Grade II listed houses in our portfolio that are not band H but have got significantly larger claims than that limit.”

He added: “It is better to include everyone but cap the amount any individual home can claim. That way you are managing the cost and broadening the base.”

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