Insurance Companies Ride Out the Storm Even As Claims from Policyholders Sink

 Insurance Companies Ride Out the Storm Even As Claims from Policyholders Sink

The flash floods that hit Boscastle in Cornwall a year ago today have barely passed. The floods were among the most devastating examples of heavy precipitation in the United Kingdom for a long time.
The remnants of a hurricane that swept across the Atlantic Ocean, gathered a great deal of water, and was then pushed high above the hamlet, causing the flood. Within two hours, the area received roughly 1,500 million liters (330 million gallons) of water.

Local firms' commercial damage could cost as much as £15 million, according to insurance companies.

The fact that things could have been much worse should provide insurers with some solace. At the same time, Hurricane Charley made landfall in Florida, causing an estimated £6 billion in damage.

A twister up to 1,000 ft (300 meters) long swept over the skies above the southern suburbs of Bristol in August of this year, barely one week after a tornado ravaged Birmingham. Twister nearly caused extensive property damage when it rushed across a 15-mile radius, which included Whitchurch suburbs.

The number of severe weather-related incidents has been on the rise, according to both government organizations and insurers, and this trend is directly correlated with the acceleration of global warming.

That Britain would experience more wind is also predicted by the government's environmental agency. There may be a repeat of the 1987 storm, which caused £2 billion in damage, because one study predicts a 30% increase in winter gales in southern England and Wales.

The environmental protection agency has predicted that peak river flows in the United Kingdom could be 20% greater by the year 2080. Considerable consequences may ensue for river flood zones as a result of this. According to a flood defense review conducted by the Environment Agency last year, 10% of the population in England and Wales currently resides in flood plains... Extreme water levels, and the likelihood of flooding, could increase by a factor of ten or twenty in certain east coast sites as a result of a mix of rising sea levels, higher tides, and altered wind patterns.

According to a recent report by the Association of British Insurers (www.abi.org.uk/), “in the UK, climate change could increase the annual costs of flooding by almost 15-fold by the 2080s under the high emissions scenario, leading to potential total losses from river, coastal and urban flooding of more than $40 bn (£22 bn)." This finding is in line with the current consensus.

Insurers were threatening to void high-risk insurance unless the government spent substantially on flood defenses. New flood planning methods, instituted as part of cost-benefit analyses, will see more assistance for flood defences in densely populated flood basins like the Vale of York, while less populated places may receive no aid at all. While these precautions will assist some densely inhabited areas deal with floods, they will not protect less densely populated areas from the water or from other expensive disasters like storms or terrorist attacks.

Axa, an insurance company, recently issued a research warning that less than half of small businesses do not have a strategy to guarantee their survival in the event of a crisis or natural catastrophe. Axa brought attention to the fact that a large number of businesses, particularly in the Southeast, do not have insurance that protects them from natural disasters like floods and fires, and even fewer have protection against the increasingly prominent threat of terrorism.

Most homeowner's insurance policies will pay for temporary housing in the event of a covered loss (e.g., a fire or flood). Similarly, many businesses offer business interruption coverage that will cover temporary housing costs (e.g., a hotel) in the event that a covered loss renders a property uninhabitable. Check the policy language carefully, though, because this is not always guaranteed.

You should still check that your insurance meets your requirements, even if you already have some. Verify all specifics of your coverage before purchasing insurance from any source. This includes direct insurers like Norwich Union, brokers like Endsleigh, and comparison sites like Moneynet (http://www.moneynet.co.uk). The floods in Boscastle exposed many residents' ignorance of the dangers of underinsurance, which they had thought would protect them to the fullest. If the coverage you have is inadequate, your insurer may only pay a portion of your claim because they believe you have been paying too little in premiums. A number of Boscastle residents experienced insurance gaps of up to 50%.

Fortunately, no lives were lost in the Boscastle flooding, despite the concerns of the emergency services. That being said, many people may not have life insurance coverage for unforeseen and uncontrollable emergencies, as expressed by the fire fighters' union after the London bombings.

As things are, it seems like "let the buyer beware" (caveat emptor) applies. The problem is only going to worsen as a result of global warming, which is already bringing more frequent and severe weather events, and as terrorist attacks continue to escalate. Finally, before taking out any financial product, consumers should read the official cover documents, verify the details, and examine all the clauses to make sure they have the right financial protection. Otherwise, they may end up being out of pocket when it comes time to make a claim.

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