PwC warns that flood insurance could become unaffordable following latest deluge
British insurers could be on the hook for £1bn following the worst year for flooding damage since 2007.
PwC’s insurance partner Mohammad Khan said the period from April to June was the wettest since records began, with insurance losses from the flooding estimated at £500,000.
He said: “Using summer flood damage as a proxy to the recent flooding across the UK, we estimate the cost to industry in 2012 to now add up to around £1bn.”
PwC’s head of catastrophe management Domenico Del Rec said the recent bad weather and flooding meant that homeowners who were exposed to flood risk might find it unaffordable to buy protection when the Statement of Principles expires on 1 July 2013.
The Statement of Principles is an obligation on insurers to offer affordable flood cover.
“Who will step in to insure homeowners exposed to flood risk, remains a key question for insurers and customers alike,” he said.
“For example, will the cost be transferred to the taxpayer, similar to the US’ federal flood insurance scheme?
“The severity of flood damage in the UK this year should act as wake-up call for new investment in flood defences, especially as costs to homeowner in flood plain areas could be up to £40,000 to make the necessary structural changes to protect their property.”
Loss adjuster Crawford & Company’s director of general property Paul Bowyer said he had seen a 27% spike in claim numbers.
“I think that number will go up to 30% on the basis that as people clean up we tend to be notified of claims,” he said.
Bowyer said the worst affected areas were the South West and Wales.
He said this week’s flooding was similar in terms of claims numbers to previous events this year.
But with winds of 100 miles per hour forecast for tomorrow, he predicted damage could be caused to properties.
Crawford said in a statement: “Crawford & Company’s helpline has been taking calls throughout the night and offering advice to homeowners and businesses.
“With bad weather forecast for the next few days, Crawford adjusters will be working this weekend to ensure claims are dealt with promptly, efficiently and in a caring manner.”
AXA’s head of commercial property claims Martin Ashfield said it would be three to four days before he had an accurate sense of claims numbers.
Ashfield said personal lines and household lines had been most affected owing to the flooding occurring in the rural areas.
But he added that the flood defences installed after the floods of 2007 had helped with lower levels of flooding, particularly in areas such as Evesham.
Aviva said in a statement that its claims teams were on the ground helping those affected by the flooding.
The insurer said that it had received calls from across the UK, with the South West and Wales most affected by flooding and the rest of the UK, particularly the Midlands and into East Anglia, experiencing damaging high winds
With 77 flood warnings still in place from the Environment Agency, and further rain and gales predicted over the weekend, Aviva has advised homeowners to take basic precautions to protect themselves and their property.
“Our loss adjusters and building contractors are already on the ground in the affected areas and have started visiting customers’ homes and assessing the damage first hand,” said Aviva’s claims director Dominic Clayden.
Zurich UK property claims director Mark Blanchard said he had received a “relatively” small number of personal and commercial lines property and motor claims for storm and flooding.
“We have been monitoring the weather in preparation and have been prepared for any potential increase in volume of claims,” he said.
“Zurich’s major incident team have been on stand-by, and we have extra people on the phones in our contact centres.
“We’ll continue to monitor the conditions over the weekend in case the bad weather looks set to worsen.”
Loss adjuster QuestGates has warned insurers against ignoring the potential environmental implications of the flooding.
QuestGates director of environmental claims Alan Dobson said: “The potential implications of the environmental damage caused by flooding are often overlooked at this early stage. “General loss adjusters will already be on the scene across the country assessing the damage, but unless measures are taken to properly assess and manage the environmental aspects of the reinstatement, the eventual costs faced by insurers, not to mention the risk to public health, could be substantial.”
Loss adjuster GAB Robins said more flooding is possible over the weekend, especially in those areas with the heaviest rainfall over the past 36 house, especially the South West, the Midlands and North Wales.