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Floor Re brings prospect of cheaper home insurance to beleaguered households

4th April 2016 Print

Homeowners living on flood plains typically pay 24 per cent more for their home insurance, according to fresh insight from MoneySuperMarket. The news coincides with today’s launch of Flood Re, a government-backed scheme designed to make home insurance ‘available and affordable’ for those who live in flood risk properties.

MoneySuperMarket analysed home insurance premiums for those living in flood risk areas, and found these homeowners typically pay £33 (or 24 per cent) more than the national average for annual contents and buildings insurance. Those who have made a claim for damages caused by flooding in the past typically see premiums rise by 213 per cent – adding £372 to the cost of cover each year.

The analysis also reveals the average claim during seven recent flood events was £22,3392. This amount varies significantly, depending on the event - those affected by the 2014 floods in the Thames Valley region claimed an average £28,051, whereas homeowners in Cumbria, Lancashire and Yorkshire in December 2015 claimed £36,483 on average. 

Commenting on the launch of Flood Re, Dan Plant, editor-in-chief at MoneySuperMarket, said: “Households who have been priced out of buying insurance completely, or who have been saddled with the prospect of enormous four-figure excesses if they make a claim, should now be able to secure cover at more affordable rates.

“Anyone living in a high-risk flood area who has recently bought home insurance should take a few minutes to run an online quotation to see what prices they would be charged now that Flood Re is in operation. If there are substantial savings to be had on their existing premium, it could be worth cancelling the current policy and taking out a new one.

“Policyholders should bear in mind that they will have to pay a cancellation fee. And if they’ve made a claim on the old policy, no premiums will be returned. But if the saving on the new policy is big enough, it could still be well worthwhile making the change.”

Home insurance trends

The long-term trend for home insurance costs across the UK is downward, but insurance companies still reserve their best prices for new customers, so someone who stays with the same insurer each year may not see the benefit of competitive pricing.

This is confirmed by MoneySuperMarket analysis, which shows that the average price for buildings and contents insurance for someone switching insurer via the site was £121 in winter 2015/16. The comparable figure from the Association of British Insurers (ABI), which shows the overall average premium for all policies, including switchers and those who stay with the same insurer, is £316 – a difference of almost £200.

Launch of Flood Re

Flood Re has been set up by the government and the ABI, so that even the highest risk homes can insure against the damage caused by flooding (providing they were built after 2009).

It will enable insurers to pass the flood insurance part of a policy for ‘high-risk’ properties to Flood Re in exchange for a relatively modest premium linked to the property’s council tax band. Insurers can then draw on Flood Re to pay any claims that arise from flooding at the properties concerned. The policy ‘excess’ (the amount paid towards the claim by the policyholder) will be limited to £250, much lower than previously for such risks.

One of the stipulations for Flood Re eligibility is that the homeowner must live at the property, so landlords living elsewhere will not qualify. With tenanted property, the responsibility for buildings insurance remains with the landlord. But tenants can search for and buy contents cover in the knowledge that they qualify for the scheme.