The recent floods affecting parts of Northern England could see insurers pay out between £80 million and £120 million to cover claims for both people’s homes and affected businesses, according to PwC.
With more than 500 properties flooded and 1,200 households evacuated since heavy rainfall caused widespread flooding in the Midlands and South Yorkshire last week, further weather warnings are in place today as forecasters predict between 35mm and 45mm of rainfall.
The number of properties that have been flooded will probably increase with further rain forecast adding to the flood damage that has already occurred, according to PwC.
Mohammad Khan, general insurance leader at PwC, continued: “This is clearly a very difficult time for those who have been impacted by the floods. However, the UK insurance industry is better prepared for the floods that have occurred and is responding as quickly as possible to ensure that affected policyholders are having their needs met.”
“Due to the number of significant floods that have unfortunately occurred since the flood in 2007, the industry is much better prepared in helping affected policyholders quickly in dealing with this extreme weather.”
“Although it is still early to estimate the full losses from these floods, the losses to date could see the insurance industry paying out between £80 million and £120 million in claims for both people’s homes and affected businesses. This estimate could rise over the coming days depending on how much further rain falls over the rest of the week.”
PwC predicts that the flooding will not lead to significant premium increases for affected policyholders.
Khan said: “Before we had Flood Re—the joint initiative between the UK government and the insurance industry to make the flood part of household insurance more affordable—policyholders that were flooded saw significant increases—sometimes by thousands of pounds—in insurance premiums.”
“PwC would not expect to see anywhere close to this level of premium increase for flood affected policyholders. Those policyholders who shop around may be able to match their current premium, but most could see a modest increase in price.”
Following the recent flooding in Northern England and with a general election taking place on 12 December, the British Insurance Brokers’ Association (BIBA) has called on the next UK government to confirm that it will continue with its commitment to ring-fence money collected through insurance premium tax (IPT) for flood defence spending.
Graeme Trudgill, executive director of BIBA, said: “In 2016, the rate of IPT included on every home insurance policy increased from 9.5% to 10%, and [the] government said that this increase would be ring-fenced to pay for flood defence and resilience measures.”
“With a whole host of spending commitments made by each of the major parties already in this election campaign, it is vital that this earmarked pot of money is not absorbed into general government revenues and spent in other areas.”