How watertight is your flood insurance?
Tony Keilty offers some advice on measures that could bring down insurance premiums for industry SMEs.
The recent floods have brought into sharp focus a major problem facing small businesses in the construction supply chain when obtaining insurance.
Owners with properties at risk of flooding have been able to buy affordable home insurance since 2000 thanks to an agreement between insurers and the government whereby insurance companies will continue to cover properties and businesses at risk, on the condition that the government invests in flood protection measures.
This is to be replaced from 2015 by a new Flood Re scheme, designed to protect homeowners in high flood risk areas from excessive insurance premiums by placing a cap on the cost. Crucially, it will exclude business properties.
A recent poll by the Federation of Small Businesses of 854 of its members in flood-hit areas found that 59% expect the cost of insuring their business to increase, 20% of them fear it will go up significantly, and 39% slightly. Worryingly, some firms are struggling to find insurance altogether, with the poll showing that 19% believe it will be significantly harder to obtain insurance and 18% slightly harder.
When a small business is flooded the business interruption consequences can be devastating. The long process of drying and decontamination can mean your business premises are uninhabitable for up to a year. The potential relocation costs or severe breaks in the construction supply chain can also have a major impact on many small businesses.
Flooding can be devastating for small businesses. Photograph: © NaturePL/SuperStock
For instance, many firms in the construction sector not even touched by the recent floods have still been affected because their subcontractors are flooded, or transport links have been closed.
The owners of commercial properties should now be making contingency plans for their flood-threatened properties. Crucially they should engage their insurance broker to help source the right policy plus explore ways of integrating their policy with flood resilience measures. This could involve:
- Replacing doors and windows with automated flood-proof models.
- Raising door thresholds to help keep shallow water out.
- Checking exterior walls for pointing and applying water-proofing sealant.
- Raising damp-proof levels and sealing floors to walls and replacing wooden floodboards with concrete with a damp-proof membrane.
- Replacing airbricks with flood-proof varieties or specially designed easy fit covers.
- Fitting non-return valves to drains and water inlet and outlet pipes to prevent wastewater from flowing back into the property.
- Repositioning electric sockets.
- Making best use of the £5,000 government grants available to businesses hit by flooding to better protect their properties.
A broker can also provide a site assessment and advice on risk management measures in conjunction with a recommended insurer. Such measures will ensure your property is more resistant to floods in the short and longer term. What’s more, this should ensure your business property benefits from affordable premiums together with much lower excess costs should disaster strike.
Tony Keilty is a director at claims service provider the Davies Group