Flood insurance argument could leave millions high and dry

Following the recent weather in the UK, Castlemead Insurance Brokers thought that this post would be topical as recent figures suggest that 200,000 homes in England and Wales could be left without cover as agreement between insurers and government ends.

About 5m homes are at risk from flooding across Britain, according to the ABI, with up to 200,000 homes in England and Wales being warned they will struggle to obtain adequate flood insurance after June 2013, when the insurance industry's voluntary flood agreement with the government ends.

The current flood insurance statement of principles agreement with the government, agreed in 2000 as a short-term measure, ends in June 2013. It states that insurers must include flood cover as standard for properties built before 1 January 2009, where the risk of flooding is low; and, crucially, insurers must allow at-risk households who already have flood cover to automatically renew cover with the same insurer, as long as flood defences are planned to be in place within five years.

The ABI's director general, Otto Thoresen, said this "grossly distorts the market" because people in lower risk flood areas pay more to subsidise those at higher risk. "Customers in high risk areas are tied to their existing insurer, and those insurers covered by it have ended up with a disproportionate number of high flood risk properties."

Commercial Properties are also being affected with insurers using flood mapping systems to identify buildings in high risk areas. Increased premiums and excesses are being imposed with cover being withdrawn for flood in certain areas.

If you need help with your insurance, please get in touch with us and we will be happy to assist.

New client for Castlemead Insurance Brokers

Castlemead Insurance Brokers have picked up another new client this week and we thought it be worth summarising exactly why as we appreciate that choosing an insurance broker can be a tricky thing to do.

In a nutshell, the client in questions' insurances have been arranged with a consolidated broker for a number of years and, after our research, it became very clear that the problems could be split into 3 definite categories.

1. Poor service

• Renewal terms e-mail to them by broker 5 days before renewal
• No visit to the premises despite premiums in excess of £15,000
• No confirmation of cover provided, nor motor / employers liability certificates issued

2. Poor advice

• Did not include stock cover in the open – valued at £70,000
• Did not include subsidence cover on the Buildings – valued at over £500,000
• Financial estimates on Liability and Business Interruption inaccurate
• Money limits too low
• No advice around insurances not arranged including Directors and Officers insurance

3. Overcharging

• Premiums had increased with no explanation
• No claims review nor rating breakdown
• Alternative quotations had not been sought
• Charges included policy fees in addition to taking commission
• Premiums were being financed through an outsourced provider at a rate of 6.25% (17.8% APR) payable over 10 months
• Not only well in excess of the standard market rate for outsourced finance, but also more expensive than the 12 month payment option with the insurance company

The end result was that Castlemead Insurance Brokers visited the client within 24 hours of the phone call, put right the cover and provided more competitive rates.

If you need help with your insurance, please get in touch with us and we will be happy to assist.

Adequacy of sum insured

Ensuring your sum insured stands at a realistic figure is an area all businesses should be concerned with, particularly relating to the replacement of machinery. Machinery can be rendered useless through a variety of risks, fire, flood and theft being the most obvious so it needs to be properly protected.

Castlemead knows that the cost of replacing machinery has gone up substantially due to currency fluctuations and that the previously healthy second hand market for many machines that enabled replacement costs to be reduced is no longer what it used to be as, due to the high prices of scrap metal, most have been “recycled”!.

Castlemead Insurance Brokers visited a company recently where their total sum insured stood at £1.7 million. 

Having carried out an inventory, the true replacement cost of their machinery alone was a little over £6 million. Had they suffered a fire or flood, the damage would have been far more than an interruption to their business.

Increasing the sum insured may not be as costly as you might think and at Castlemead we provide a breakdown of how your insurance premium is made up so that you can see at a glance what effect an increase would have. As part of our annual review we also monitor the sums insured to ensure that you are adequately covered this year and every year.

If you would like help, please get in touch with Castlemead.

Insurance fraud costs the insurance industry £2bn a year

Demonstrating the new tougher Court Action for Fraudsters, six week sentences have been handed down to two fraudsters who invented a car accident to claim over £5,000 in whiplash compensation. Insurers had set aside a further £75,000 for other expected claims relating to the incident.

The court heard that Samina Bashir and her partner admitted making the bogus claim which also involved her parents, who received a suspended sentence for their part in the fraud.

Organised motor fraud was responsible for approximately 30,000 “crash-for-cash” related incidents in 2011 costing the industry millions of pounds. The insurance fraud bureau (IFB) has been established to clamp down on these criminal gangs. The IFB are currently co-ordinating 26 live cases valued in excess of £60,000,000.

Insurance fraud is rumoured to add an average of £44 to every UK policyholders annual bill so the emphasis placed on having the right insurance broker is even more important now than it ever has been.