Sorry for the horrendous title. I would usually go for an
amusing pun but given the serious nature of the topic I can’t bring myself to
think of one.
Unless you have been abroad or on the moon since December
you can’t help but have noticed the severe weather the country has experienced
causing all sorts of damage. The most powerful effect of these storms has been
flood - the more southern counties bearing the brunt. Fingers are being pointed
all over the place but the truth is that no one can control the weather, not
least the government or insurers.
So what happens now? With around 6,000 properties affected
by flooding across the southern counties and Thames areas we have,
unsurprisingly, seen a number of flood and storm damage claims over recent
weeks with varying degrees of severity. In each case we have noticed insurers
straining to keep up with the management of these claims. Although we can all
see weather reports I think the severity and the longevity of the weather has
taken everyone by surprise and Insurers are working extra hours and employing
additional loss adjusters to get things moving quickly.
You also cannot help but have noticed the plethora of
politicians in wellingtons wading through communities to demonstrate their
concern. In a rather unhelpful gesture Leader of the Opposition Ed Miliband
waved his knowledgeable hand and decided it prudent to suggest the Government
put pressure on insurers to pay claims quickly. What it seems Mr Miliband does
not appreciate is the existing pressure insurers are to manage these claims and
actually it is already in the insurer’s interest to pay claims quickly or to
make interim payments in order to ease their burden. What the government are
quite rightly concentrating on now is the practical assistance that can be
given, the army are getting their hands dirty… or rather ‘feet wet’ as are
numerous other public services in an effort to assist residents. Also in the
forefront of their mind is how the clear-up operation will be managed. It is
not going to be an easy task and many local authorities have already had their
wrists slapped by government for ignoring environmental health issues where sewerage
is escaping or even charging residents for sandbags.
So what is the outcome for insurers? Well like all things
time will tell. In the wake of 9/11 Terrorism insurance was taken away from
insurers and a central pool set up for that particular type of cover. That was
an extreme and catastrophic incident for a group of particular insurers and so
could not be ignored. The flooding in this country is a little more spread out
and so no one insurer is disproportionately affected. What I believe we will
see moving forward is insurers using a more complicated and thorough system for
ascertaining whether someone is at risk of flooding. I suspect that, like
subsidence, flood will now necessitate a higher excess and I imagine that the
peril of Flood and possibly Storm will now be an optional ‘buy in’ rather than
standard cover – particularly in certain areas.
What we also might find, which already happens to a certain
extent, is that insurers will have a certain capacity per postcode. That is to
say a single insurer will not want to insure an entire post-code or area. Many
insurers are careful about city centre risks already. You might recall the
Bunsfield incident where there was a large explosion at an industrial complex.
Many insurers had huge claims as a result because they insured entire streets
or developments locally. The recent weather will only serve to highlight the
risks that insurers face in providing ‘too much’ cover in a certain area.
What is certain is that the damage caused and claimed for
this winter is likely to have an impact on future rates. Where does this leave
you as a client? I really think this is where the value of a broker comes into
play. With constant exposure to the market we can monitor and sometimes foresee
changes in insurer’s attitudes and so will be in the best position to make sure
you have the cover you need at a fair price. Ultimately providing you with the
peace of mind that you need.
Alistair
