availability of flood cover

This winter has again seen many homes across the United Kingdom suffering severe flood damage. In general, our experience has been that firms respond well to these difficult claims. But perhaps of more concern to many policyholders is whether they will be covered for any future flood damage when they renew their insurance.

The Association of British Insurers (ABI) has recently issued its ‘Statement of Principles on the Provision of Flooding Insurance’. This explains the circumstances in which firms that are members of the ABI will make flood cover available, and what will happen in relation to the properties that are most at risk. It describes situations where ‘existing flood defences provide less protection than the Department for Environment, Food & Rural Affairs’ indicative minimum standard of 1 in 75 years for urban areas’.

In such cases, the ABI says, ‘Where improvements in flood defences sufficient to meet these standards are scheduled for completion within the next 5 years, insurers will maintain flood cover for domestic properties and small businesses which they already insure. The premiums charged and other policy terms – such as excesses – will reflect the risk.’

The ABI recognises that disputes may arise about how the statement applies to individual cases, and we have been considering the approach we should take to any of these disputes that come to us.

We do not usually deal with complaints that concern a firm’s decisions about whether or not to offer cover. For example, we would not normally investigate a complaint about a firm’s refusal to offer car insurance to a young driver. Such matters concern the firm’s commercial judgement and, under our rules, we can dismiss complaints without considering their merits if they centre on a firm’s legitimate use of its commercial judgement.

Compliance with the ABI statement would seem to represent good industry practice and, in any disputed decision to decline to renew flood cover, we would need to be satisfied that an insurer had fully complied with the statement. So firms should note that we will look into complaints referred to us about the availability of flood cover. A firm that fails to comply with the commitments in the ABI statement is unlikely to be making an appropriate use of its commercial judgement.

In looking at such disputes, our role will be to see whether, in its handling of the matter, the firm has complied with the ABI statement and other relevant industry requirements. It is not our role to require a firm to make flood cover (or any other cover) available where – for legitimate commercial reasons – it has decided that it does not wish to do this.