When Cockermouth was left so devastated last year, insurers remembered the lessons from the 2007 floods, moving quickly and communicating well. But speakers at Insurance Times’s first claims clinic of 2010 insist that prevention is still better than cure. We report on how a lack of cohesion between government and industry could be restricting progress

Three years after the record-breaking floods of 2007 and six months on from the devastation that hit Cockermouth in West Cumbria, Insurance Times’s first claims clinic of the year tackled the ever-present threat posed by flooding. The event was also held during a week when the Flooding and Water Management Act finally became law, following the Pitt Review of existing flooding prevention measures – and much lobbying by the insurance sector.

The clinic, held at Vinopolis on London’s South Bank and chaired by Insurance Times’s assistant editor David Blackman, therefore proved a

useful reminder of the lessons that had been learnt over the past few years and the many challenges that remain.

It began with a memorable account of the Cockermouth floods of late last year as GAB Robins’ property field director, Chris Day, jolted the delegates with a picture of the full horror experienced by the town’s inhabitants. He gave a riveting insight into the plight of one policyholder, asking delegates to imagine what it was to be like to be somebody whose livelihood had been completely ruined.

“On 19 November last year, your world came to an end,” he said. “Something like 340mm of rain fell on the Northern Lake District. Sections of the main street in Cockermouth were flooded to a depth of two metres of water. Your shop was filled with filthy stinking water and debris, destroying everything in it.”

Surge of activity

Both Day and the ABI’s director of general insurance, Nick Starling, felt that many lessons had been learnt from the summer floods of 2007, however. Day explained how adjusters worked with insurers to get hold of customer lists and make pre-emptive visits to properties to assess damages before claims had been made.

He then told delegates that when he and his adjusting team finally gained access to the town on 20 November, they acted quickly to get to grips with the situation. “We got together with some suppliers and restoration contractors, and made joint visits to the site. This was particularly important so that we could attack the problem as early as possible.”

Further, he added that insurers and adjusters were aware that the policyholders were mainly small businesses that could not afford to wait a long time for settlements. “Working with insurers, particularly AXA, we were able to alter our processes to ensure that earlier interim payments were made,” Day said. Meanwhile, steps were taken to ensure that repairs were dealt with by local contractors and suppliers, injecting a much-needed boost into the local economy.

Starling explained that insurers learnt a great deal about the importance of communication from 2007, adding that affected policyholders were given an action plan. “Everyone in Cockermouth got a leaflet, which was jointly produced by the ABI and the Chartered Institute of Loss Adjusters. It was directed at policyholders, explaining what you can expect from your insurer. They all got leaflets about the possibilities regarding resilient repairs.

“At public meetings, people could ask questions, so they were getting a lot of information. One of the key things that people need to know is what is going to happen next and how they can deal with the devastation that has occurred,” Starling said.

AXA’s customer experience director, Paul Meehan, stressed that it was vital to get “on the ground” in disaster-struck areas like Cockermouth. From his experience, he said, people were worried about the consequences of the disaster. “A lot of the questions that were asked of me in town hall meetings were essentially: ‘What are you going to do about premiums, and ultimately are you going to insure us?’”

Water worlds

Although he said that Cockermouth could have been a lot worse, as the losses were mainly small and there was a large amount of alternative accommodation available, Meehan stressed that more was needed to be done to ensure that a similar incident did not occur again.

“We have to find a way to prevent this from happening. That is the fundamental thing we have to do. We have issues surrounding building on flood plains. We can still do that, but we need to get smarter about how we construct properties … we must do it in a smarter way so that when the inevitable occurs, we have defences against it,” he explained.

He pointed out an idea proposed by Prince Charles about building water-based estates with plenty of “water escape ways” was one that could be looked at when discussing sensible property developments for the future.

British Property Federation spokesman Andrew Teacher said advances have been made in the design features of new homes, and the Environment Agency has the “necessary planning teeth” to reject questionable planning. Starling agreed that the “worst excesses of silly planning” were gone. But Teacher pointed out there was a need for more joined-up thinking between government, the insurance sector, the environment agency and development industry.

He added that many problems remained in getting the required response from the government, pointing out that while the Department of Communities and Local Government deals with property, construction is handled by the Department of Business, Innovation and Skills. He believed this division has led to poor communication and delayed responses. “It is this lack of joined-up thinking in government that is causing a lot of the problems,” he said.

Future defences

But Starling did acknowledge that Cockermouth had served as a timely reminder to politicians, noting that flood prevention risk featured in all the main parties’ political manifestos. He believed that Britain was unique in having flood insurance included in property insurance, and added that this took an enormous burden away from a government facing a crippling budget deficit.

Further, he pointed out that under the statement of principles, insurers have agreed to cover households and small business in high-risk areas where flood plains are planned.

But Starling explained that this agreement would came to an end in 2013 and, from then on, insurers would need more support from the government in order to continue to insure people in high-risk areas. “We want the government to make sure that we can continue with a fully flourishing commercial market in insurance,” he said. “What we really need from government is some kind of longer-term plan about how to deal with flood risk.”

He stressed that although money was tight, flood defences were a worthwhile investment and generated good returns. “At the moment, the government spends £850m a year on flood defences and that is guaranteed until 2011, but who know what will happen after that? I‘d like to point out that for every pound you’ve invested in a flood defence you get £8 in return; it is pretty good value for money.”

Starling said of the recent Flooding and Water Management Act: “It was a good achievement for the industry that a lot of what we asked for went into the bill. It’s a start. It gives us a framework for addressing flood risk,” he said. “One of the problems in 2007 was that no one was in control of water. There is a real chance now of assessing risk; and the leadership is addressing how we deal with flood risk.”

But he added that the bill needed targets for local authorities and funding, and a longer-term vision. Day added that those planning authorities would require further education on flood risk because “for many, flooding prevention remains way down the list of priorities”.

Starling said that insurers did not demand that the government alone had to meet the required costs, but he made it clear that insurers could not be expected to pay for the necessary measures. “We are quite open to how funding will come in, but we do need funding to avoid moving to a position where it is harder to supply people with affordable insurance in parts of the country; and this will be a problem that is made worse with climate change.”

Clear as mud

Teacher argued that the sector could take a line from sustainability measures designed to encourage people to be more energy efficient.

He said that it was possible to incentivise people to invest in making their properties more resilient to flooding, by reducing insurance premiums.

But Starling pointed out that “people don’t like resilient repairs” and were reluctant to spend on preventative measures, because features such as raised plugs and bare boards were signs to prospective buyers that the house was in a high-risk area and could devalue their property.

The panel agreed that the public needed to become more educated about their insurance requirements. Meehan pointed out that he was struck in Cockermouth by how little people knew about their policy and what it covered them for, while Teacher urged the insurance sector to reduce the amount of jargon used in communicating to customers.

“People don’t understand what their insurance policies say,” Day added. “That’s not their fault, that’s the insurance industry’s fault.”

He warned that while the insurance sector had received good feedback from their actions in Cockermouth, people in high-risk areas still desperately needed help in understanding and dealing with their situation. “We realised from 2007 that people had greater questions about insurance, not only about their claims but also about the insurance future for their properties.

So really, as an insurance profession we have to work out what we can do for people in those circumstances.” IT