There are many reasons that business owners don't want to invest in flood resilience measures; lack of information, a flood is considered to be a one-off event, it is the responsibility of the authorities to manage flood risk but also because there isn’t much of a financial incentive for them too. One element with which there is the ability to incentivise businesses owners is by recognising and rewarding their investment by offering them more competitive flood insurance premiums and terms.
Flood Re is currently investing in research into flood resilience measures as part of its longer-term plans to adopting a risk based pricing approach (risk based pricing being where the cost of the insurance for the specific property is calculated by the risk it faces from the different types of flooding and also taking in to account resilient and resistant measures the property has in place). Businesses however are not covered by the Flood Re scheme; and as such their need to invest in resilience/resistance in addition to the insurance market moving to a more formalised approach to pricing and underwriting for resilience measures is far more urgent.
For small businesses, there is hope on the horizon. In September 2016, a working party was established with the support of DEFRA to develop a plan to enable better uptake or resilience/resistance measures for small businesses at high flood risk; it’s known as The Property Flood Resilience Action Plan (or sometime the Bonfield Report).
The action plan is made up of 6 Task Groups covering a broad range of activities including; Actions to assist flood victims; Embedding resilience in small businesses; Training and product standards, certification and skills; Communication and Data:
The Task Groups are lead and made up of experts in their fields and those with sector knowledge and the ability to influence and make change happen.
The action plan is set to run over 5 years with the end result being that it becomes standard practice for properties at high flood risk to be made resilient. It will however only be achieved by extensive industry collaboration.
Task Group 2 is the group tacking how and what value is placed on the various resistance/resilience measures and how this in turn this value can be passed back to business owners through more competitive insurance premiums and terms.
Distilling it down, flood resilience/resistance measure are forms of data enrichment – they both have the ability to influence firstly whether a claim will be made but also much a claim will cost (i.e. claims frequency and severity)
How will insurers work out the value of resilient/resistant measures?
There are likely to be many factors that insurers will consider in assessing the value of measures and they are likely to ask questions that include:
What type of measures are in place?
Are there measures robust and all encompassing?
Are the measures permanent or do they need a person to deploy them?
What is the quality of the products fitted?
Are the products installed correctly?
Are and how are the products maintained?
How accurate is the information about the measures?
This is by no means an exhaustive list. In addition, there are likely to be many other questions posed by insurers and others that the team will have to find both answers and solutions too, for example; how and where should the data stored? who is responsible for keeping he data up to date? who owns the data? who should have access to it and how do they access it? should the data be free to access and use? Just a small list of things to do then...
Here at Flood Assist we’re not only delighted that wheels are in motion to bring about this positive change but we’re also looking forwards to playing our part in helping make this happen too.