Insurance Providers Weather the Storm While Consumers Flounder

This year marks the first anniversary of flash flooding at Boscastle, Cornwall. Some of the most severe flooding in Britain for many years was caused by the sudden rain.

Flood was caused by remnants of a hurricane that crossed the Atlantic. It collected large amounts of water and then was pushed high above the village, dumping around 1,500ml (330mgallons) of water in just two hours.

Insurance companies estimated that the cost of commercial damage to local businesses would run up to PS15 million at the time.

Insurers may find some relief in knowing that it could have been worse. Hurricane Charley, which struck Florida at the same time, caused damage of over PS6bn.

Residents in Bristol saw a twister that was over 1,000 feet (300 metres) long sweep across the sky above the suburbs of Bristol, just one week after the tornado devastated Birmingham. The tornado swept over a 15-mile stretch, including Whitchurch suburbs, and was close to causing extensive property damage.

Both insurers and government agencies have acknowledged that they have witnessed an increase in severe weather-related incidents due to global warming.

According to the Government’s environment agency, climate predictions indicate that Britain will become windier. One study indicates that there will be 30 percent more gales across Wales and Southern England in winter, increasing the likelihood of another storm similar to 1987’s PS2 billion in damage.

The environment agency estimates that peak river flows could rise by 20% in Britain by 2080. This could have significant implications for flood zones of rivers. The Environment Agency reviewed flood defenses last year and found that one-tenth of the population of England and Wales lives in flood plains. Sea level rise combined with high tides, changes in winds, could lead to increased extreme water levels and thus flood risk on some east coast locations.

This view is supported by the Association of British Insurers, who stated in a recent report, “In the UK, climate change could increase flooding costs by almost 15 fold by 2080s under high emission scenarios, leading to potential total losses of river, coastal, and urban flooding of more that $40 billion (PS22 billion).

Insurers threatened to cancel high-risk policies if the Government did not invest heavily in flood defenses. The Government has created new flood planning procedures as part of cost-benefit studies. This means that floodplains with high populations like the Vale of York, will get additional flood defenses. However, less populous areas could end up with no flood protection. These measures will help some areas that are more populated against flooding. However, they won’t be of any benefit to lower-population regions and do not provide protection against other expensive emergencies like hurricanes or terrorist acts.

A recent report from Axa, an insurer, stated that less than half of small businesses do not have a plan to protect their business in the event of an emergency or natural disaster. Axa pointed out that many small businesses, particularly in the South East are not protected against flood and fire, as well as fewer protections against terrorism.

Most household insurance policies cover alternative accommodation costs after a claim for fire or flood. However, this coverage is not always guaranteed so make sure to read the policy.

You need to make sure that your insurance is appropriate for you, even if you have it. It doesn’t matter where you get your insurance, such as from Norwich Union or brokers like Endsleigh. However, it is important to verify all details. Boscastle residents believed they were fully protected until the floods revealed that they were under-insured. Insurers may pay only a portion of a claim if the coverage is inadequate. This could be because they believe you are under-paying premiums. Boscastle residents experienced insurance shortages up to 50%.

Despite fears of the emergency services, there were no deaths in the Boscastle flooding. However, the fears of the fire fighters union following the London bombings raised concerns that exclusion clauses in life insurance policies could lead to many people not having any coverage for unforeseeable emergencies.

It seems that the current situation is one where caveat emptor (or “let the buyer take care”) is the rule. This situation is only going to get worse due to global warming, which will cause increased extreme weather and rising terrorist threats. Consumers must ensure that they have proper financial protection. They should read and review all financial products before they sign any contract.