FLOOD RISKS by Graeme Shurben
- for publication in 'Brokers Monthly' February 2009Click to download the PDF file
Interview with Graeme Shurben, Senior Consultant, Fitzgerald Consulting
The recurring UK mass-flooding events always attract the worst prognosis from the popular media and others, even when the insurance industry as a whole responds well. Brokers usually find themselves sitting helplessly in the middle, but are things going to get worse or better? The Editor and Graeme Shurben, Senior Consultant at Fitzgerald Consulting discuss the changing face of flood claims.
AN: Brokers bear the brunt at the sharp end when mega-flood events occur. Has increased governmental regulation changed the handling of flood claims?
GS: Yes. Repairs necessary as a result of these incidents are now significantly affected by new directives - especially Building Regulations and the HIP (Home Information Pack) regime. Policyholders now need to ensure building works meet health and safety and also environmental regulations, for example that underfloor insulation is included even where it did not exist before. Also, they need to obtain a variety of certificates at conclusion of the repairs, including electrical, plumbing, drying etc, for inclusion in any future HIP.
AN: What about ‘mould’? A few years back this was the latest ‘scare’. A contemporary examination of a home with wooden raised floors that had experienced a rising water table, and some ingress of sewage contaminated flood water under the floorboards was found to have suffered no damage whatsoever. The ground was quite dry, with no sign of mould. Has mould turned out to be as much of a problem as it was cracked up to be?
GS: Yes, it is still a problem. In the case you mention, the water didn’t actually rise that high and mould is not solely restricted under the floorboards. Flooded homes and premises are now regularly stripped out at ground floor level, which deals with this issue at that level.
However, in Hull for instance, the water table was so high that damp continued to rise, even after this stripping out, and mould materialised at first floor levels, where no proper treatment was undertaken. Also, there have been examples of dampness - and consequent mould - appearing in a policyholder’s property where a neighbouring house was not appropriately treated. Apart from an incorrect specification or poor execution of works, this might arise where the neighbouring property is uninsured. Brokers will want to give their clients good advice and need to appreciate the necessity for speed in effecting repairs and in ensuring these are comprehensive.
AN: Does the alternative accommodation section of the policy present any risks for brokers and their personal lines clients?
GS: Yes. Traditionally, buildings and contents policies cumulatively offered substantial levels of cover - often up to 15% of the respective sums insured. Some policies now have ‘unlimited’ cover on buildings and contents, instead of sums insured, and contain limits for alternative accommodation. In one example in Hull, for a major insurer, this was restricted to an overall £15k - inadequate to cover what might be in excess of 12 months’ loss in this context. Brokers and their clients need to check very carefully exactly what cover they are getting.
AN: Similarly, have there been problems on commercial policies where the business interruption cover had an indemnity period of the conventional 12 months?
GS: Yes. In several cases, the flooded businesses were affected for in excess of this period and policyholders did not receive a full indemnity for their losses. Brokers need to give clients good advice on the likely periods they might be out of their premises following a serious flood (or fire).
AN: Will the new, larger excesses and deductibles being put on policies in potential flood areas cause brokers problems?
GS: Typically, the new excess might be £5,000. Brokers may well have clients in the future who decide not to make a claim, initially at least. Policyholders may accordingly organise repairs which, for all sorts of reasons, are inadequate. They may well also find, subsequently, that the cost of these exceeds £5k and then make a claim on insurers. It is possible that insurers will say their position has been prejudiced by late notification and/or badly arranged repairs. Brokers will want to give proper advice, and also protect their own PI position.
Graeme Shurben
Graeme Shurben has nearly 30 years’ of property claims and marketing experience in loss adjusting and senior management, including time as Divisional Director at Questgates and National Account Director at GAB Robins.
Specific projects included managing claims portfolios for Hurricane Wilma; due diligence on PI insurer acquisition; UK loss adjusting
assistance and mentoring; and the handling of a high volume commercial claims portfolio.More recently he was actively involved in the mass of flood related claims centred in Hull in 2007 and in Morpeth, Northumberland in the latter half of 2008.
