MGA emphasises the importance of ’building back better’ following flood damage and escape of water, calling on the government to collaborate with industry bodies for a sustainable route forward
MGA Magenta Insurance, the trading name of inet3, is calling on the government to have an “official rethink” about the impact of escape of water (EOW) and flooding on insurance, suggesting that a similar model to Flood Re could be utilised to tackle EOW risks.
Catherine Bell, chairman of Magenta Insurance, told Insurance Times: “It’s time to have an official rethink about water and how it affects insurance.
“We are not pretending to have all the answers, but we are prepared to do something about it and we would like to have a think about all the contributory elements in detail, so that we can begin to form a plan.”
Magenta Insurance is, therefore, urging that the government comes together with the Chartered Insurance Institute (CII), Association of British Insurers (ABI), the Water Services Regulation Authority (Ofwat), National House Building Council and the Environment Agency to get to grips with this ”societal problem”, in the same way that Flood Re liaises with industry bodies.
If this does not happen, she fears the insurance sector may end up paying flood claims “in perpetuity”.
Amended criteria
The MGA intends to put together a forum to address issues around flooding and EOW - it is urging anyone who is interested to get in touch.
Bell continued: “The environment is the [causal] factor of flooding. If you are looking at this problem in totality, the water levels are rising, the ice caps are melting [and] more flood plains [are] experiencing regular floods. Developers are building on flood plains, [but] they are not building houses differently to accommodate this.
“There is no logic in [Flood Re] ending if we haven’t mitigated the risks sufficiently by that time.”
April Stowers, Magenta Insurance’s director of strategic development, believes Flood Re needs to be extended, but with an amended criteria.
”All new properties, which are pretty much timber framed, are going to be a problem in the future.”
Bell added that click plastic piping used in new builds is “just another compounding factor” here, as they lack longevity.
Last year, the MGA launched a Covid-19 decontamination and cleaning service to provide a solution for brokers and insurers covering these properties.
‘Double whammy’ of claims
A series of extreme weather events, which included Storm Christoph in January and the Beast from the East II in February, occuring amid the Covid-19 pandemic further complicated matters around flooding-related claims by creating a “double whammy” for insurers - many were experiencing back-to-back claims.
“If a house is in a flood zone and people are living with the threat of flood, how are those customers supposed to deal with other claims that hit them on top of flood claims?” Bell asked.
Having been a victim of a water claim herself, Bell said the day this happened she ”fell to [her] knees and [cried], I was so broken” as irreplaceable items, such as photos of her children, had been ruined.
Speaking about the impact of flooding, Stowers added: “The policyholder takes the brunt of it. [But] it’s complicated. For six or seven years now, the government has been talking about the resilience scheme, including Flood Re, but the breakdown has always been ’who is going to pay for it?’”
Bell questioned how flood claims could be fulfilled if a resident is quarantining with Covid-19? Also, there is the issue of relocating flood victims while a property is being repaired, yet still maintaining social distancing guidelines.
Furthermore, with the government committed to achieve net zero carbon emissions by 2050, Bell believes that tackling issues around building back better following flood damage is vital in contributing to this climate change mission.
“The more people that hunker down and protect their properties, the less harmful to the environment,” she added.
No comments yet