Anyone who thinks commercial insurance is an unfair cost should look at the plight of thousands of British businesses that have suffered in recent floods, says Simon Thomas, Managing Director of Cardiff-based insurance broker Creative Risk Solutions.
Just a week after the worst of the flooding in Yorkshire in June 2007, almost 7,000 businesses had submitted claims for an average of £100,000 of damage.
Soon, the problem for the UK insurance market was compounded when a similar and arguably more serious situation unfolded in Gloucestershire. Recent downpours in the north of England has seen the problem of flooding occur again for thousands of homeowners and businesses, many who have not yet recovered from the first disaster.
Not only were factories, shops, offices and warehouses hit by physical devastation which saw many towns and villages cut-off for a week or more, but the cost of business interruption in many cases was significant.
The deluge of rainfall that swamped Britain in the summer of 2007 is estimated to have led to payouts totalling £3 billion. A fear now, of course, is that this bill will have to be paid by the customers of insurance companies and will inevitably lead to higher premiums in the future.
But the flooding has still caused substantial costs, with the UK's largest insurer Aviva - best known for running Norwich Union - warning that it faced losses of £400 million as a result of flooding in June and July.
While there may well be an impact on premiums, our brokers at Creative Risk Solutions (www.creativerisksolutions.co.uk) believe it will not be significant and that, more importantly, the floods will lead to a number of positive outcomes.
Fierce lobbying from the insurance industry has, for example, now persuaded the Government to raise spending on flood defences to £800 million by 2011.
And German insurer Allianz has gone on the record saying the Biblical downpour should now act as an overdue "wake up call" for the industry to protect itself from the risk of flooding.
But what should you do and who should you turn to if you fear that your business may be at risk from a repeat of these terrible floods?
Simon Thomas, Director of Creative Risk Solutions encourages people to seek professional advice from their broker. “The industry does not rely on catch-all solutions, but is able to tailor individual insurance packages for every business and every situation.You should discuss the implications on your future insurance premium/excess directly with your insurer and/or broker while your local Environment Agency office should be able to tell you if there are any capital flood defence schemes planned for your area and on what timescale.
If you do need to carry out physical improvements to your premises then it also essential to get advice from a specialist, who could undertake a comprehensive flood risk assessment and recommend an appropriate set of measures for the property”.