Flood Re scheme: where to find cheaper flood insurance deals

Flood Re is a new scheme designed to help people living in high flood risk areas get access to affordable home insurance.

It launches today (Monday 4^th April 2016) following long negotiations between the Government and the insurance industry.

Flood Re is not a home insurer itself but will work with existing insurers to help them offer more affordable deals to those in areas at risk of flooding.

Those that own a home in a high risk flood area generally find it much harder to get affordable home insurance to protect their property.

According to the Association of British Insurers (ABI), fully drying out, repairing and restoring a flooded home often costs between £20,000 and £45,000.

Insurers charge higher premiums to guard against these levels of losses and with consecutive years of bad weather these premiums are creeping up. Insurers are currently paying out around £1.4 billion in flood and storm damage as a result of the winter flooding in the north of England and Scotland earlier this year.

To help make home insurance accessible to as many people as possible, the insurance sector set up Flood Re with help from the Government.

Flood Re is a reinsurance company, which helps other insurance companies insure themselves against losses.

However, unlike other reinsurance companies, it is a not-for-profit fund which is owned and managed by the insurance industry.

It is the first scheme of its kind in the world.

 

 

The new scheme will allow insurers to pass the flood element of home insurance policies to Flood Re.

In order to pay for the claims that arise there will be a central fund made up two elements; the premiums charged and an annual levy on insurers.

The premiums paid for flood risks will be capped based on Council Tax bands and are set out in the table below.

Council Tax Band	A,B	C	D	E	F	G	H
Buildings policy	£132	£148	£168	£199	£260	£334	£800
Contents policy	£78	£98	£108	£131	£148	£206	£400
Combined policy	£210	£246	£276	£330	£408	£540	£1200

The premiums above are for the flood element of a policy only and so do not include the pricing for other risks like fire or theft.

Insurers will also have to pay an annual levy based on market share, which is set to amount to £180 million per year for the first five years.

It’s not yet clear whether this extra cost on insurers will be passed on to other homeowners that aren’t in a flood risk area in the form of higher premiums.

Currently there are 17 insurers signed up to Flood Re. We’ve listed them below.

• Admiral
• Avantia
• Aviva
• Bank of Scotland
• Cherish
• Churchill
• Direct Line
• First Direct
• Halifax
• Hiscox
• HSBC
• Legal & General
• LV=
• Lloyds Bank
• More Than
• Nationwide
• Privilege

More insurers are expected to come on board over the next few months, so there should be even more choice as the scheme develops.

When looking for a new deal on your home insurance you should always shop around.

Rather than just focusing on the cost, it's important to make sure the policy suits your needs and provides the best level of cover. 

Those with a home in a flood risk area can now look specifically at the brands that are part of the Flood Re scheme as well as using comparison engines in their hunt for the best deal.

Once you’ve done a bit of research, you should also speak to your current insurer to see if it can offer a better deal or new options thanks to Flood Re.

Groups like Consumer Intelligence suggest it may be worth cancelling an existing policy to take advantage of potential savings offered through insurers part of the Flood Re scheme. Its analysis shows the gap between the most competitive home insurance policies and the average is around £80 a year, with the lowest annual premium at around £118 compared to £198 for the market average.

You should check if this is the case for your policy.

The ABI says that over time Flood Re should mean that people with homes at risk of flooding have a greater choice of cover at a more affordable price.

For more tips on getting the best deal on your home insurance check our Cut your home insurance costs guide.

Whether you will benefit from the Flood Re scheme will depend if you live in a flood risk area but also how much you pay for the flooding element of your home insurance already.

You will also only be eligible if your property was built after January 1^st 2009.

The Association of British Insurers expect around 350,000 or 2% of eligible households to benefit from Flood Re over time.

Homeowners in a high flood risk area will already have some idea about how much of a premium they are paying to insure their home, but if you are buying a property take a look at online flood risk maps available for England, Wales and Scotland.

You may also be able to find a cheaper deal on your home insurance through group buying.

Bought By Many is a firm that brings groups of people in the same boat together to negotiate better terms from insurers than you would get on your own.

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