The purpose of Flood Re is to promote affordable Home Insurance for properties in flood risk areas in the UK. Individuals who have suffered from floods previously, have in some instances not been able to insure their property or have paid increased premiums and excesses.
It is estimated, over 350,000 homes will benefit from the introduction of Flood Re. Premium and excesses should reduce making insurance for flood risk homes easier to obtain.
Insurance companies are required to fund Flood Re by paying a percentage of their turnover, as a levy. The money raised each year will pay for future flood claims, resulting in insurers being able to offer premiums at an affordable rate. Even though insurance companies need to contribute to Flood Re not all will offer insurance in the high flood risk regions. This may change once the scheme has been running for a period of time. Flood Re will be directly accountable to Parliament.
The Chancellor also announced in his budget, ‘Insurance Premium Tax’ will be increasing from 9.5% to 10% from October and the extra 0.5% increase will be used to build new flood defences, reducing claims going forward. This should also drive flood confidence, assisting with insurance premiums.
Customers wishing to insure their home in flood risk areas will continue to pay directly to their insurer and will report a claim to their insurance company as they do today. There will be no need to contact Flood Re directly.
Flood Re is designed to help home owners who live in their property (Owner Occupiers) and individuals who only insure their contents in rented properties. Flood Re will not cover businesses, which are excluded from the scheme. The scheme will also not cover properties built after 1 January 2009. This is to minimise properties being built after this date, are not built in areas of high flood risk.