Floods Recede to Reveal Toxic Insurance Sharks

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Floods Recede to Reveal Toxic Insurance Sharks

After the floods, the deluge! Home insurance premiums which were never cheap are now set to rise in Britain. Is anybody surprised ? The UK's two biggest insurers flexed their fins and said rates would have to be increased to cover the costs of this summer's flooding – which are estimated at £3.3bn.

Norwich Union, said it was planning to increase buildings and contents premiums by 10% after Monday, although people whose houses were actually flooded may have to stump up an extra 50%.

To see pictures of the floods as experienced by yours truly click here : Floods in the UK

Royal Bank of Scotland which controls over 18 insurance brands in Britain, warned of "upward pressure" on premiums, but didn’t quantify this pressure.

Those living in the areas affected by flooding will see the steepest increases. :-(

Norwich Union said the most recent floods in Gloucestershire and the south will cost it £165m. This is on top of the £175m to be paid out for the floods in the north of England earlier in the year.

A spokeperson said that premiums were already being reviewed "This is not just because of the recent flooding, but also reflects the higher cost of repairing homes generally. People tend to have more bathrooms, which means a greater risk of damage from water leaks, and they are using more expensive materials for home improvements, which means an increased cost for repairs."

Royal Bank of Scotland, which is responsible for Direct Line, Churchill and Tesco insurance plans, said the June floods had cost it £125m and the July floods would lead to a similar cost.

Sir Fred Goodwin, CEO, said: "Clearly the pressure will be upwards, but we will wait and see what comes through. If Norwich Union has put up prices by 10%, then we will see what the market reaction is, but you can't help but conclude the direction of the pressure would be up rather than down."

Some insurance experts see the announcement by Norwich Union as giving the gren light for others to follow and it is expected that insurance excesses may rise along with the premiums.

Others see competition coming in to play with other companie strying to build their client base by offering lower prices.

Liverpool Victoria, for example, which now calls itself LV=, said it would not be raising premiums.

According to Andy Beard, LV’s head of business "Our view is that current pressures in the household insurance market do not warrant any substantial blanket increase in premium levels. We insure around half a million homes across the UK and we are committed to price stability for our customers.

Harsh weather incidents, such as the recent flooding, are no longer a freak occurrence and our pricing system already makes allowance for these being more commonplace. We can see no current or emerging reason to increase household insurance premiums significantly in the foreseeable future."

Well done Mr Beard, no prizes for guessing who I’ll be moving my insurance to !
Lloyds TSB said it was too early to assess the effects of the flooding on future premiums.

All in all I don’t expect the insurance companies to be losing much money, so it might well be a good time to take a closer look at their share prices to see if there are any bargains to be had.

Certainly RBS seems to have been having a hard time of it over the last 6 months

6-month candlestick chart



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