Desmond’s heavy toll
Devastating storm could cause £450m of damages
AS THOUSANDS of households count the cost of Storm Desmond, insurance companies are braced for a huge claims bill. Insurance giant Axa said yesterday its call centres had been swamped by frantic customers, with calls to its household claims team quadrupling over the weekend. Teams of ‘loss adjusters’ are now trawling through the wreckage of customers’ houses to assess the damage and work out how much they will have to pay out in claims.
Amanda Blanc, chief executive of Axa Insurance – which covers 1.5m households – says it is ‘too soon to tell’ but stressed its current priority is providing temporary accommodation and money to customers to tide them over.
She added that payouts are likely to be particularly high in this case as households are flooded with standing water as opposed to water which flows through the property. This means contamination is more likely, increasing the clean-up costs.
One expert predicted the floods will prove to be more devastating than those that hit Cumbria in 2009. Mohammad Khan, head of general insurance at PwC, predicted the damage could hit £400m to £450m, with the insurance industry paying out up to £250m in claims.
But he added this bill could easily rise, with forecasters predicting another seven inches of rain may fall across Northern Ireland, Scotland and parts of Northern England by Thursday.
According to catastrophe risk modellers JBA Risk Management, a typical flood claim is about £30,000, rising to £130,000. As the biggest home insurers in the UK, Aviva and Direct Line have most to lose. But their share prices barely budged yesterday.
One City analyst said there was little for shareholders, at least, to be concerned about.
Eamonn Flanagan from Shore Capital pointed out that before the weekend the insurance industry had enjoyed a benign year with few big weather related claims. He said: ‘For individuals this is a real tragedy. But from a shareholder’s point of view, this is not likely to be a big deal for insurance companies.’
With just three weeks until Christmas, the timing of the floods could hardly be worse for many families. But there is another sting in the tail.
After years of delay, a Government-backed scheme to provide affordable home insurance for roughly 500,000 people living in high flood-risk areas will finally come into force in April next year As part of an agreement with the Government, insurance companies have committed to offer policies to these households until the scheme – called ‘Flood Re’ – is up and running.
But these policies can be hugely expensive, making them unaffordable for many families.
There are fears this will be the case for many of the households affected by the floods at the weekend, and that they will not be covered by insurance.
They would, however, have been able to afford cover if Flood Re were in force today.
Brendan McCafferty, Flood Re’s chief executive, said: ‘It is early days but in general terms this might prove to be the case.
‘Those people affected will at least know that Flood Re will be in place next year.’