Flood Re freezes premiums for the first time
– Scheme anticipates that pricing changes will benefit consumers –
Flood Re has today announced that, for the first time, it will not pass on to insurers the annual increase in premium thresholds. The statute that established the Scheme increases premium thresholds in line with the Consumer Price Index (CPI) at the start of each financial year. However, Flood Re will this year freeze the premiums it charges to insurers when they cede policies to the Scheme.
The premiums charged by Flood Re to insurers are capped, based on Council Tax bands. For example, they currently start at £79 for an annual policy for contents only policies for properties in Bands A and B, rising to £406 for a Band H home.
Andy Bord, Chief Executive of Flood Re, said: “The latest data, from our half-year results, showed a continued improvement in the availability of home insurance for both those with prior flood claims as well as those in ‘at risk’ areas. On affordability, the average premium for those in flood risk areas rose by less than the mass-market average.
“The decision to freeze premiums is an important one, which we have taken after discussions with insurers. Despite recent short-term increases, insurance market premiums have decreased over recent years.
“Flood Re has a strong financial position and we consider it appropriate to freeze premiums which in the UK’s competitive home insurance market, we anticipate, will be passed on to consumers.”
The Scheme’s half yearly results, which were released in December 2017, showed a continuing, although slower than expected, growth in the number of people across the country benefitting from Flood Re backed policies 77,000 policies were written between 31 March 2017 and 30 September 2017, meaning the number of policies benefiting from Flood Re at that time increased to 142,000.
Notes to Editors
For further information please contact Ailsa Blunt at firstname.lastname@example.org
or 07930 364 425.
1. About Flood Re
Flood Re exists to promote the affordability and availability of flood insurance for homeowners across the UK. Flood Re’s operation promotes a competitive insurance market that customers can take advantage of. Flood Re does not set consumer prices – this remains a decision for insurers to make.
Insurers can place the flood risk element of domestic property insurance with Flood Re at a premium linked to property Council Tax bands. Flood Re sits in the background, with the purchase of the policy and the process of making a claim being unchanged.
The scheme launched on 4 April 2016 as an independent body that is privately owned and operated, whilst also being publicly accountable, and insurers are now making use of it to benefit their customers.
Flood Re has a rating of A- “stable” outlook by Standard and Poor’s, one of the world’s leading independent credit ratings agencies. Flood Re is regulated by the Prudential Regulation Authority and the Financial Conduct Authority (firm reference number: 706046).
2. About the availability and affordability data
This is from independent research by Consumer Intelligence, a research consultancy that focuses on the insurance and banking sectors. At the end of 2015, Consumer Intelligence (CI) was commissioned by Flood Re to evaluate the impact of Flood Re on home insurance availability and affordability. A total of 2,752 householders formed the sample group in 2016, and 1,951 in 2018. This showed that:
- Before the introduction of Flood Re, only 9% of householders who had made prior flood claims could get quotes from two or more insurers, with 0% being able to get quotes from five or more.
- By January 2018, availability had improved so that 100% could get quotes from five insurers and 74% of those with flood claims could choose from at least 10 insurers.
- Four out of five of householders with a prior flood claim saw price reductions of more than 50%.