Homeowners whose property is in an area at risk of flooding are being denied insurance because their properties have been recorded incorrectly by the same scheme designed to help them.
Approximately 350,000 homes could benefit from the Flood Re scheme which was launched in April and backed by the UK Government. The scheme raises money through a levy on all buildings insurance policies across the Country, costing each household about £10.50. The funds amount to about £180 million a year which helps to pay for flood claims – and keeps the cost of insuring a home in a flood-prone area low. Since its launch, 44 insurers – between them representing 90% of the market – have signed up to the scheme – and around 53,000 homes have benefited to date.
Homeowners with a mortgage have to take out buildings insurance – but where the premiums are very high, this can make the property unsellable. Insurers in the past have naturally been reluctant to take on properties at risk of flooding – with the average payout for those affected by last winter’s floods amounting to £48,000.
With the Flood Re scheme, premiums in flood-prone areas are kept to a realistic amount. Insurers pay the Flood Re scheme from £210 to £1,200 (dependant on the council tax band of the property), to take over responsibility for the flooding element of buildings insurance cover from them. This premium, together with the £180 million raised through the annual levy on all policies, provides a large enough pot to subsidise the cost of insurance for householders in high risk areas.
However, some householders have been unable to participate in the scheme because of the way their addresses have been recorded. The problems arise from properties that have a name rather than a number, as the names can be recorded incorrectly. For example, a house called ‘Apple trees’ might be listed in the Flood Re database as ‘Apple trees house’ and insurers would not then be able to locate the property. Consequently they would not be able to offer the more affordable premiums and excesses that the Flood Re scheme supports.
Direct Line has had 3 instances of the problem arising, and the National Flood Forum has seen two similar cases. Insurers cannot update the data held by Flood Re and are advising customers affected to contact Flood Re directly. However, Flood Re have said that those affected need to ask their insurer to raise the issue with them.
You can use the Flood Risk Map to check if you are in a flood risk zone
If you are considering purchasing a property in a flood risk area, contact our property team for advice.