Will the Floods Affect Your Home Insurance Premiums in 2008?

The summer of 2007 has seen some of the worst floods in recent history, with three major incidents of flooding in the UK from April through August.

As late as mid-July, insurance industry spokesmen were still saying that they didn't expect to have to raise insurance premiums based on their estimates, but by late August that tune had changed. That's when Norwich Union home insurance, which insures one in five homes in the UK, announced that they'll be raising premiums by 10% in the coming year.

The floods are not the only factor in their decision, Norwich Union says. Just the final straw that forced them to raise prices by nearly three times the rate of inflation. Claims against the insurance company will reach an estimated £340m, according to a Norwich Union spokesmen. In a statement released by NU, the insurance company also cited a "background of stable premiums for the last six to seven years" and the cost of additional staffing to deal with the flooding crisis as factors in the decision to raise UK home insurance premiums.

Norwich Union is not alone. The Association of British Insurers says that home insurance claims from this summer's floods are expected to top £2bn, the highest flood bill in over twenty years. Lloyds TSB, Direct Line and Churchill home insurance are contemplating similar premium rises, though they have not yet announced the amount their premiums are expected to rise.

With the four biggest home insurers in the country either announcing or contemplating a rise in premiums, it's very likely that your buildings and contents insurance premiums will rise, by as much as ten percent. If your home is in one of the areas that is identified as flood prone, you can expect the highest rate hikes, but it's expected that the premium increases will affect all policy holders to some extent.

The UK is unique in providing flood cover as a standard part of home insurance policies. In many other parts of the world, the question about flood insurance is not "how much will it cost?" but "can I get it?" In flood-prone areas of the U.S, for instance, many insurers refuse to offer coverage to homeowners at all, leaving them at the mercy of the weather or necessitating government intervention in flood repairs. The ABI has worked for years with the British government to help abate the risk of flooding and to ensure that all homeowners in affected areas have adequate flood insurance. In the wake of the floods this summer, the ABI maintains that it will continue to honor its commitment to provide insurance for homes in flood plain areas.

If you own a home in a flood-prone area, you may be able to reduce your premiums by taking special measures to protect your property from flood damage. Those measures may include special plumbing valves to prevent sewage from backing up into your home and specific types of construction that can reduce the damage done by floods to your home. For more details about ways to protect your home in case of flood, contact your local insurer, or visit the ABI's web site about flood insurance and flood resilience.