With flooding becoming increasingly prevalent, is your property adequately insured?
More than 9 out of 10 UK buildings are insured for the wrong amount, with 81% being underinsured, according to the latest figures from Rebuild Cost Assessment Ltd.
On average, buildings that are found to be underinsured are covered for just 63% of the amount they should be insured for – the rebuild cost. This means that in the event of a property insurance claim, the amount paid out is likely to be reduced in line with the Average Clause.
But increasing the sum insured to the right amount could put strains on an already tight budget. Here’s an example of how re-thinking the flood risk element of property insurance can help in this situation from our Ecosystem partner, FloodFlash.
The challenge
A residential property management business based in Reading has a number of blocks of flats in its portfolio, several of which are on a known flood plain.
The organisation undertook a valuation of their portfolio by having a rebuild cost assessment and this highlighted significant underinsurance. The increases in sums insured left them faced with limited options and unaffordable premiums. In fact, only one insurer was willing to provide the cover including flood risk.
Without the flood cover, the premiums did reduce significantly and opened up the market as more insurers were able to offer terms. However, the management company were keen to maintain flood risk protection.
The FloodFlash solution
Traditional flood insurance looks at the overall sums insured, meaning that as the amount of cover increases, the premium increases too. But this doesn’t take into account the reality of the impact a flood event may have on a property.
In this particular case, the group of properties had no accommodation on the ground floor and had a step leading to the entrance. This allowed the business to look at a different type of flood risk insurance.
FloodFlash offers parametric insurance which is available to businesses and professional landlords. Each policy is linked to a mobile-connected sensor installed at the property. The sensor then reports any flooding. When the agreed trigger-depth has been reached, the sensor alerts FloodFlash and the claims process begins – no documents required. Having multiple trigger depths, each with their own pay out value, can significantly reduce the premium.
At the ground level, there is under croft parking, but no accommodation. Therefore, the company chose a low payout to cover any necessary clean-up. The step also provided natural resilience up to 0.2m. Trigger 1 was set at a flooding depth of 0.2m with a payout of £5000.
At 0.5m and 1m, they chose higher payouts to reflect the added costs associated with that level of flooding, including redecoration and alternative accommodation for residents.Trigger 2 was set at a flooding depth of 0.5m with a £25,000 payout and trigger 3 at a flood depth of 1m with a payout of £100,000.
This provided an overall cover total of £130,000 but the multi-trigger approach kept the costs down.
Perform – a fast and efficient claims process
As soon as the installed sensor confirms the chosen trigger depth has been reached by a flood, payment will be arranged. FloodFlash aim to pay all claims within 7 days. In most cases, where the sensor data can be easily validated, the claim will be paid much faster.
Find out more about an alternative to standard flood risk insurance
FloodFlash policies are available for businesses and rental properties operated through a company – not domestic homeowners. Working in partnership with FloodFlash, our team can provide you with flood insurance cover quickly.