Homeowners in Scotland have been warned against leaving their properties without insurance while they wait for a new deal for flood-risk homes to take effect.
The havoc that flooding can wreak on homes and possessions was underlined once again this month when homes in the Scottish Borders and the north of England were hit by Storm Desmond. Bank of Scotland puts the cost of flood damage to homeowners at £18,000 “per incident”, based on its claims data.
The new Flood Re scheme, which is aimed at keeping premiums affordable for properties hit by or at risk of flooding, will be introduced in April.
It replaces the previous arrangement between insurers and the UK government, called the Statement of Principles, under which insurers guaranteed affordable cover for flood-risk homes in return for government investment in flood defences.
The cost of home insurance has risen sharply in recent months for homeowners in certain flood risk areas, leading some to defer renewing their cover until Flood Re is in effect.
The impact of Storm Desmond will have been compounded for some homeowners by a lack of insurance, including those whose policies have expired but who have opted to wait for Flood Re to kick in before taking out new cover.
Home insurance premiums have fallen over the past three years, but they edged up in the summer and could continue to climb as insurers pass on higher regulatory costs (such as last month’s hike in insurance premium tax (IPT) from 6 to 9.5 per cent).
That will add £10.50 to the average home insurance premium for all residential properties, including those not at risk of flooding.
The scheme will ensure that more than 350,000 flood risk properties will still be able to secure affordable insurance. However many properties are ineligible for Flood Re, including buy-to-let homes, leasehold flats and properties built after 2009.
That leaves up to 800,000 properties in the UK outside the scheme, according to the British Property Federation.
Home insurance for those properties may consequently be extortionate or even unavailable. The additional complication for homeowners without insurance is that they might consequently be unable to sell their home or secure new mortgage finance.
And while insurers have to pay into the Flood Re scheme, they aren’t obliged to offer quotes to all applicants, pointed out Rod Jones, insurance expert at uSwitch.com.
“This means that the hopes of affordable premiums are, at the moment, just that – they are not guaranteed. And even if more providers take on the risk and provide quotes, it could be some time before competition kicks in and drives prices down,” he said.
Around one in 22 homes north of the Border is classed as being at risk of flooding, according to the Scottish Environmental Protection Agency (Sepa). Some 5,000 homes in Scotland would face stiff premium increases without the protection provided by agreements such as Flood Re, the Association of British Insurers (ABI) has said.
“For those forced to run the risk of not insuring their home, the scheme can’t come soon enough,” said Jones. “This is especially true following the insurance premium tax increase that kicked in last month, hitting all insurance policies.”
There are several steps you can take if you’re worried about rising home insurance costs, however.
With Flood Re premiums based on council tax bands it’s worth checking that your home is in the appropriate category.
If you’re concerned that your property could be hit by flooding you can request a flood risk assessment survey. This is designed to identify how your home could be affected by floods, determine the effectiveness of any pre-existing flood measures in place and offer ways of preventing flood water from entering your home.
The assessments, which can be used to show insurers that you’ve sought to mitigate flood risk, should be carried out by qualified, independent professionals.
They can be sourced through organisations including the Royal Institution of Chartered Surveyors (RICS) Scotland, the Institution of Civil Engineers and the Chartered Association of Building Engineers
You can also sign up for flood alerts from Sepa, which has a map on its website that can help you see whether you’re at risk of river or coastal flooding.
It’s worth noting that the insurers are not allowed to use this information when setting insurance premiums on properties in Scotland.
Responsibilities for flooding: http://www.sepa.org.uk/environment/water/flooding/responsibilities-for-flooding/#LA
For more information on flood-risk homes in Scotland: http://www.sepa.org.uk/flooding/flood_extent_maps.aspx.
Sign up for Sepa’s flood alert service here: http://floodline.sepa.org.uk/floodingsignup/