Flood Insurance: The winners and losers

Personally I am happy to pay an extra £15 per year towards my home insurance costs to help support families devastated by flood damaged homes

July should see the launch of the new government-backed scheme to tackle the issue of flood insurance for homes in areas at high risk from flooding.

Welcomed by most, this scheme will ensure the availability of affordable flood insurance cover for approximately 350,000 homeowners in respect of houses they or their family live in, all or part of the time – or in certain circumstances are unoccupied.


In simple terms this will work by capping the cost of the flood insurance element of the buildings and contents insurance policies of eligible homeowners in high-risk flood areas, based on their council tax band.

To supplement the funding required to support the scheme, a levy will be charged on all other homeowners when they buy their buildings and contents insurance.

The levy for the scheme is anticipated at roughly £10.50 per homeowner buying buildings and contents insurance. However, with administration and distribution costs, the true cost is more in the region of £15.

Personally I am happy to pay an extra £15 per year towards my home insurance costs to help support families devastated by flood damaged homes, and believe the so-called Flood Re scheme, overall, serves the public good.

That said, many will argue the scheme does not go far enough, particularly in respect of blocks of flats, most of which are excluded.

But, in reality, what is the scale of the problem and how do we all work together to solve the outstanding issues? Simply expecting insurers alone to make this issue go away and asking them to take more social responsibility is not a financially realistic proposal.

Flat owners will normally be eligible for the Flood Re scheme in respect of contents insurance for flats they occupy some or all of the time.

It is also expected that blocks of three or less units, where the freeholder resides in one of the flats, will also be eligible for buildings insurance, albeit the buildings will probably need to be insured on a household buildings policy, which may not be an ideal solution.

Blocks of four or more units insured as a whole, as currently required by most leases, will fall outside the scope of the Flood Re scheme.

However, I estimate more than 2 million flat owners who live in a flat on which they have bought a long lease will not be contributing to the levy in respect of their buildings insurance, and will effectively be better off.

In addition, it is arguable that flat owners on higher level floors will not be exposed to flood damage, despite the block itself being located in a high-risk area. So, possibly, most flat owners will be in no hurry to see a market-based solution for flats as this would leave them out of pocket.

The reality is that insurers are likely to be more flexible with the provision of flood insurance where there is a large commercial relationship with a freeholder or managing agent. So, if your block is in a high-risk area, then being part of a large insurance arrangement may be of benefit.

This is now a very significant consideration if you are thinking of assuming responsibility for the block insurance as a result of enfranchisement.

Paul Robertson is Managing Director of Midway Insurance Services and 1st Sure Flats.


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