A scheme to provide cheaper insurance for flood-prone small businesses in the UK is due to launch in the next month.
The plan is a response to concerns that small companies at risk of flooding find it impossible to buy affordable cover. According to research produced by the Federation of Small Businesses last year, more than half of those located in flood plains do not have property flood insurance.
The Flood Re scheme, which was launched in April, is designed to give homeowners access to cheap cover. But businesses, including buy-to-let property owners, are excluded. Flood Re is partly financed by a levy that is passed to homeowners, and those behind the scheme argue that it would be difficult to extend that levy to cover companies.
“It is a major concern that small businesses, though similarly vulnerable, have no such agreement in place to protect them,” said the FSB’s report last year.
The new initiative has been developed by the British Insurance Brokers Association. It is working with a panel of four insurance companies that will underwrite the policies.
Graeme Trudgill, executive director at BIBA, says the scheme will make insurance for businesses in flood-prone areas “cheaper and more widely available.”
Unlike Flood Re, the BIBA scheme has no government involvement, will not be backed by a levy and there is no subsidy involved from elsewhere. Instead, insurers will take a much closer look at the risks each business is facing before pricing the policies.
“We’ll use detailed flood maps, and also take account of resistance and resilience measures that have been installed,” Mr Trudgill said. “The vast majority of people will be able to get a quote.”
The insurance will cover property as well as business interruption and theft, in the same way as traditional commercial policies do. It will also offer an “excess buyback” which is a chance for customers to pay a higher premium in exchange for a lower excess. It will be aimed at businesses with up to 500 employees, and will also offer cover to landlords.
There had been hopes the BIBA scheme would launch in September, but the start date is now expected to be next month. Mr Trudgill said: “We never had a firm date, and the gestation period is shorter than it was for Flood Re.”
Small businesses were hit hard by the floods that hit northern England and Scotland in December last year. The FSB says that nearly a fifth of companies directly affected by the floods are still not fully operational.