Flood Re backs “Flood Performance Certificate” for homeowners

Increases in flooding and flood damage has led a think-tank to suggest homes should have a ‘flood performance certificate’ to show insurers or potential buyers.

The Social Market Foundation (SMF) suggested the Flood Performance Certificate (FPC) would be modelled on the Energy Performance Certificate (EPC) to give homeowners a better idea of how to prepare their home for flooding.

It says: “Over the last 10 years, an average of 19,000 homes have made flood-related insurance claims. And many households would benefit from improving protection as flooding is not predictable: two-thirds of the residential properties flooded in the major event in summer 2007 were not previously identified as high risk on flood maps.”

Despite this number, the SMF says only a small number of households have taken measures to better prepare for potential floods.

It hopes a FPC would help improve on that number, subsequently reducing the risk and the cost of claims to insurers, therefore reducing premiums for the consumer.

James Burton, director of Product Management, Insurance UK and Ireland, LexisNexis Risk Solutions, said: ”Conventional flood data sets, such as those powering our Map View system, are very successful at determining which areas are at risk of flood. The challenge is to complement this valuable data with a considered score, based on, ‘on-the-ground’ knowledge of the individual property and the community in which is located.”

The idea of incentivising a good flood performance has been backed by Flood Re, a government backed scheme helping those in need of flood insurance.

A spokesperson said: “We welcome the publication of the Social Market Foundation report, exploring different policy options for incentivising the take-up of these improvements.

“At Flood Re, we believe that rewarding homeowner action will be more effective than penalising inaction. Therefore, we will be working with insurers, flood risk communities and our other partners to investigate how we can recognise and reward adoption of resilient improvements by householders and how we might “build back better” following a flood catastrophe in the future.”

But is the EPC system the answer?

According to a poll commissioned by insurance agency Just Landlords, it found that 73% of homeowners do not know their property’s EPC rating, and 65% are not aware that improving their rating could save them money.

Burton said: ”Assuming the property can be demonstrated to be well-prepared for flooding, the assessments will benefit the homeowner, though many homeowners at risk of flood may be poorly resourced.”

So, if a system which has been in effect since 2007 is not having much effect, why would a new, identical system work?

The EPC system has become common practice for homeowners as they look to sell their home, but the study shows that 95% have not measured their energy performance, while many didn’t know you could make changes to improve your rating.

Would the cost of having a house’s flood performance rating continually checked, be worth the potential savings on an insurance premium?

Burton continued: “Since the impact of an uninsured flood is devastating, the case for intervention is compelling. Even with Flood Re, covering claims for ceded policies or the government providing support in cases of hardship, the cost of the flood is being borne. Between the stakeholders, including householders, Insurers, Flood Re and government, the cost of preparing for floods, which should include provision for recognition of that preparation by insurance, will be lower than the cost of doing nothing.”