If your business has been affected by flooding this year, you know that insurance is a lifeline, even though excess clause amounts have risen by an average of 1,750% in the last three years. But will you be able to renew it?
Insurers and Government Cooperation
The Statement of Principles is an agreement between government and the insurers to say that you will. This is in return for a pledge to spend on flood defences, although even some plans for these have been affected by recent cuts. The agreement is due to expire in June 2013.
The Association of Business Insurers (ABI) is currently in discussion with the Department for Environment, Food and Rural Affairs (DEFRA) about what will replace it. The insurers propose a new fund to cover flood payments and keep premiums down to affordable levels. Property policy premiums would contribute a token amount of around £20 to help get it started, but it would also need what is described as an ‘overdraft facility’ from the government.
ABI requires the government to share the risk and says that we are the only country that does not have some form of government intervention on flood insurance. But DEFRA has not agreed to the overdraft facility, and if no deal can be reached, it is unlikely that affordable flood insurance will be available. Accountants PricewaterhouseCoopers estimate the insurance bill for flooding in June and November 2012 will top £1 billion.
As in so many areas, it seems inevitable that small businesses with limited resources have to be hit hardest? Sole traders working from a home on a flood plain have double the anxiety.
Ways to Reduce Flood Damage
The University of Salford’s Centre for Disaster Resilience thinks we rely too much on insurance, anyway. After a recent survey of small businesses in Cockermouth, their lead researcher, Dr Bingunath Ingirige said: ‘Climate change and rising insurance costs mean that SMEs need to begin investigating other ways to reduce the impact of flooding.’
The survey found that only very few had installed flood resilient wall finishes or moved vital equipment above the ground floor. Their survey report calls for businesses to consult trained professionals such as chartered surveyors, and to follow their recommendations for effective mitigation and prevention improvements to their properties.
If you are in a risk area, you should be considering whether you could divert or raise funds, and how much you could afford to invest in this type of protection. Your outsourced bookkeepers would be happy to discuss this with you and may have fund raising ideas you haven’t thought of.