Concern that South West SMEs could be hit by gaps in flood cover
Small businesses in flood prone areas of the Westcountry could be left without affordable insurance cover after they were excluded from proposals to address the issue of high risk properties.
The Government and the insurance industry have been working together to find an affordable solution for properties in areas that are vulnerable to flooding.
In recent years, businesses across the Westcountry have been badly affected by major flood incidents, with flooding in Boscastle, Lostwithiel and Mevagissey causing hundreds of thousands of pounds worth of damage.
After months of discussion on the issue, the Government and the insurance industry have recently ended a consultation on its proposed Flood Re scheme, a not-for-profit fund to provide affordable flood cover for high-risk properties which will be funded by a levy of approximately £10 on annual premiums.
For residential properties this will mean that the average band D council tax property will pay no more than £800 for insurance.
But this will not apply to businesses such as small shops and bed and breakfasts who could find it impossible to afford cover.
Michael Cooper, business development director at Pool-based Richfords Fire and Flood, which helps with the clean up operation after floods, said: "I think it is a genuine concern. Bed and breakfasts and small retailers in the South West are not like big corporate firms that can afford large insurance bills, for a lot of B&Bs they are in a residential property that's been turned into a business." With the average cost of a flood incident costing between £30,000 and £35,000, Mr Cooper warned firms not to consider foregoing insurance in order to save costs.
"A lot of people find it difficult to shop around for insurance but, sometimes, using a broker can help. We have seen business and domestic customers who have been unable to obtain cover but a broker has known an avenue whereby they find something," he said. "We would always say 'don't risk it'. We have seen it happen so many times where people don't have insurance and it's only when a flood actually happens that they realise how expensive it is to replace things."
The British Insurance Brokers' Association has also spelled out its concerns on the issue, saying that while it believes Flood Re is a good option for domestic properties, it will leave small businesses exposed.
BIBA's CEO Steve White said: "Whilst we believe that the proposed model can work, we believe that excluding small businesses – which employ around 14 million people – would be a mistake as this could make finding affordable cover difficult.
"Furthermore, the point of the agreement is to provide affordable cover for those that need it most and by excluding 'genuinely uninsurable properties', those that need it most would not be able to access cover. This could leave them high and dry."