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Insurance Providers Weather The Storm While Consumers Flounder
By: R.Green
We have just had the first year’s anniversary of the flash flooding which
occurred at Boscastle in Cornwall. The floods saw some of the worst damage
wrought by sudden rainfall in the UK for many years.
The flood was caused by the remains of a hurricane which crossed the Atlantic,
collecting vast amounts of water crossing, and was then pushed high above an
area inland of the village depositing around 1,500m litres (330m gallons) of
water within two hours.
At the time insurance companies were estimating the bill for commercial damage
to local businesses, would be as high as £15m.
There is perhaps some comfort for insurers in that it could have been worse.
Hurricane Charley, which hit Florida around the same time, cost over an
estimated £6bn.
In August this year, just a week after Birmingham was battered by a tornado,
residents in Bristol witnessed a twister which was up to 1,000 ft (300metres)
long sweeping across the skies over the southern suburbs. The twister swept
across a 15-mile area, including the suburbs of Whitchurch, and came close to
causing widespread property damage.
Both government organisations and insurers have admitted that with global
warming increasing, they have seen an increase in the number of serious weather
related incidences.
The Governments environment agency has stated that, “climate predictions also
indicate that Britain will be windier. One study suggests 30 percent more gales
in Wales and southern England in winter, increasing the risk of another storm
like that in 1987, which left £2 billion of damage in its wake.”
According to the environment agency, “current estimates are that peak river
flows in Britain could be 20 percent higher by 2080. This could have important
implications for the flood zones of rivers - in a review of flood defences last
year, the Environment Agency found that a tenth of the population in England and
Wales now lives on flood plains… The combination of sea level rise with high
tides and changes in winds could increase the frequency of extreme water
levels—and hence risk of flooding—in some east coast locations by ten, or even,
twenty-fold.”
The Association of British Insurers ( http://www.abi.org.uk/ ) support this view
stating in a recent report that, “in the UK, climate change could increase the
annual costs of flooding by almost 15-fold by the 2080s under the high emissions
scenario, leading to potential total losses from river, coastal and urban
flooding of more than $40 bn (£22 bn).”
Some insurers had threatened to start cancelling high risk policies unless the
Government invested heavily in providing improved flood defences. As part of
cost benefit studies, the Government has introduced new flood planning
procedures, which mean that highly-populated flood plains like the Vale of York
will receive additional help with defences, but less populated areas may end up
with nothing. These measures go some way to helping some of the more highly
populated areas against flooding, but do nothing for regions with lower
population densities, and provide no protection against other costly emergencies
such as hurricanes or acts of terrorism.
A recent report by the insurer Axa warned that fewer than 50% of small firms do
not have a plan in place to ensure that their business could survive should they
be hit by an emergency or disaster. Axa highlighted that many businesses,
especially in the South East, are not covered against environmental risks such
as fire and flood, and fewer have any protection against the now high profile
terrorism threats.
Following a claim, such as for a fire, or flooding, most household insurance
policies will cover the cost of alternative accommodation, if the property is
uninhabitable; likewise, many companies have business interruption cover, which
will pay the cost of alternative accommodation, however this is not always
guaranteed and you need to carefully check the policy wording.
Even if you do have insurance, you need to ensure that it is suitable for your
needs. Wherever you obtain your insurance, whether it is from a direct insurer
such as Norwich Union, brokers like Endsleigh, or through comparison sites such
as Moneynet ( http://www.moneynet.co.uk ), it is vitally important to check all
your coverage details. Many people in Boscastle believed that they were
completely protected, only to discover after the floods that they had become
victims to under-insurance. If the level of cover obtained is not adequate, then
insurers may only pay a proportion of a claim, taking the view that you have
been under-paying on premiums. Several residents in Boscastle faced insurance
shortfalls of up to 50 per cent.
Thankfully in the Boscastle flooding, despite fears from the emergency services,
there was no loss of life; however as the fire fighters union fears following
the London bombings, exclusion clauses placed into life insurance policies could
mean that many individuals do not currently have any cover for certain
unpredictable emergency events which are out of their control.
The upshot appears to be that the current situation is one of caveat emptor, or
"let the buyer beware". A situation that is likely to get worse with global
warming causing increased extreme weather conditions, and rising terrorism
threats. At the end of the day, for consumers to ensure they have the correct
financial protection, they must actually read all the official cover documents,
check the details, and examine all the clauses, when they take out any financial
product, if they are not to find themselves out of pocket when a claim needs to
be made.
About the Author:
Richard lives in Edinburgh, occasionally writing for the personal finance blog
Cashzilla ( http://cashzilla.blogspot.com/ ), and reciting Vogon poetry. |
