Flood victims suffer as insurance costs rise

Flood victims continue to face spiralling costs for home insurance as excesses for flood cover rise to levels that are making their properties virtually impossible to sell.

Many have invested thousands to protect their homes from flooding, but these efforts are rarely rewarded by insurers.
"People are coming to us with huge premiums and flood excesses of up to £30,000, which is as good as having no insurance at all and makes their property virtually worthless," says Mary Dhonau, chief executive of the National Flood Forum, a charity that advises flood victims.

"The problem has got steadily worse over the past year and we are now being overwhelmed by calls from homeowners who have spent a huge amount protecting their property, but are still being charged ridiculous premiums or refused cover altogether."

Chris Wreghitt's Axa home insurance premium leapt to more than three times what it had been when his Worcestershire property was flooded in 2007.

"Prior to the flood, I was paying just under £1,000 a year, and when I came to renew in 2008 they put the premium up to £1,638," he says. "But this year they wanted to increase it to £3,747."

There was a big excess too, though Wreghitt negotiated it down. "The first time I renewed, they wanted to impose a flood excess of £20,000, but I complained and they cut that to £10,000."
However, according to Ray Boulger, senior technical manager with mortgage broker John Charcol, even a flood excess of £10,000 can present serious problems if you want to sell.

"Any lender would be nervous if the flood excess was above £5,000, and it could be very difficult for a potential buyer to get a mortgage," he says. "This could make the property difficult to sell or it would have to be sold at a significantly lower price."

A spokeswoman for Axa said the company now imposed a maximum flood excess of £10,000, adding: "Mr Wreghitt initially took out his home insurance policy at a considerably discounted introductory price. Following the floods of 2007, the premium was up-weighted to reflect the risk of future flooding, as well as the very substantial six-figure claim that had been settled.
"In 2009, the premium was re-assessed to bring it in line with our normal pricing criteria and the value of his home and contents."

By 2008 559,000 homes in England and Wales were at serious risk of flooding, according to the Environment Agency, up from 517,000 in 2006. This increase looks set to continue as the agency's techniques for predicting which areas will flood improve.

"Our mapping processes for identifying flood risk are getting better and more properties are being designated as at risk of flooding," said a spokesman for the Environment Agency.
Since the floods in 2007, the Environment Agency has invested heavily in flood defences and has set up an early warning service which uses text messages to give those at risk advance notice of an impending flood. But the agency is disappointed that these steps, and those taken by customers, are rarely reflected in lower insurance charges.

"Only a handful of insurers are rewarding people who make their properties safer or sign up to our flood warning service with lower premiums and lower excesses," the spokesman for the Environment Agency said. "We would urge insurers to take account of floodproofing work and people signing up to our warning service."

Pensioner Sue Jenkins Clarke thought she would have no problem selling her Cheltenham home after she borrowed £25,0000 to have the garden flat "tanked" to protect it from flooding (the foundations are made waterproof so that moisture cannot rise from the water table), after water had seeped through the floor during the floods of 2007. But in September, a few days before contracts were due to be exchanged, her buyers pulled out.

"They said it was because they couldn't get contents insurance from anyone because of the flooding," she says. "I couldn't understand it because I still had contents cover and the money I had spent meant the water seepage problem couldn't happen again."

When Jenkins Clarke checked with her insurer, they told her they were happy to continue providing cover, but would take the same view as other companies when it came to a new owner.
"It seemed illogical that I could get cover but my buyer couldn't," she says. "It felt as if there was no way to get out of here and I began to feel angry."

Fortunately, the National Flood Forum was able to point Jenkins Clarke to a specialist broker who could arrange the necessary cover, but she has yet to find a buyer.

Insurance broker Neil Cook, of Equity & General Insurance Services, which specialises in flood insurance, says it can be worth looking beyond the big-name firms when it comes to flood cover.

"Some big insurers had their fingers burnt in 2007 and have become extremely cautious," he says. "But specialist brokers use smaller underwriters that were not so severely affected and are still willing to look at individual cases and levels of risk rather than imposing a blanket policy."

In 2002 the insurance industry agreed with the government to continue providing cover to existing customers whose homes were designated at significant risk of flooding and, crucially for people selling their homes, in 2008 this commitment was extended to cover new owners of affected properties. So Jenkins Clarke's insurer, for example, should have covered the new buyer. However, there are no limits on the premiums or excesses that can be asked of a potential buyer, as Michael McDonald discovered when he came to sell a cottage which had been affected by flooding last January.

When McDonald's wife inherited the Lancashire property in March, there appeared to be no problems with the insurance. Aviva, the insurer, had only increased the premium from £696 a year to £840 after the flood claim, and the Environment Agency had told McDonald the flood was a one-off occurrence.

But last month, just days before completion, the buyer for the cottage threatened to pull out because Aviva wanted to increase the annual premium to £2,800 and impose a flood excess of £8,500.

"The buyer said these charges were like taking out a second mortgage and he couldn't afford them," says McDonald. "I told him I'd find him cheaper insurance and tried the internet comparison sites, but they all rejected the property because it had been flooded."
Neil Cook came to McDonald's rescue. "They managed to get the new owner a home insurance premium of just £750 a year with an excess of £2,500," he says.

An Aviva spokeswoman said: "The property flooded in January 2008 and we paid out £52,000 in claims costs. The property has had a sizeable flood claim and therefore in our view, is at very high risk of flooding. Only a very small percentage of our customers who have been flooded will receive an increased excess, however it is likely that customers who have made a large flood claim will attract an increased excess."

Malcolm Tarling, of the Association of British Insurers, says anyone having problems getting flood cover should use a broker to help them get the best deal. But he insists that insurers have good reasons for exercising caution when it comes to flood insurance.

"The average flood claim in some parts of the country can be up to £45,000 and in the summer of 2007 insurers paid out £3bn, the equivalent of four years' claims, in a period of just six weeks," he says.

"In addition, there is scientific evidence that severe weather incidents are becoming more likely and more severe, and insurers have to take this into account."

What to do if you have been flooded

• Use a broker to find the best insurance deal – the National Flood Forum • Do not cancel your insurance policy until you have another

Source: Neil Cooke 9-11-09

Comment Received by email 11th November 09

I had a client ring up yesterday he lives in east London although there was a local brook that burst its banks 10 years ago it is not a high risk area he had about £1200 for years I quoted him £476 !!!!!

If you live in SOUTH WOODFORD E18 or similar areas that can be deamed to be in flood plains or possible flood risks areas, please do not fall into the trap of thinking you are getting a fair insurance deal on your household policy if you deal with ansurance provider who understands the risk rather than just those online sausage factories you may genuinely be able to reduce your premiums by 60%