flood Insurance

New flood insurance leaves small businesses in deep water

Draft regulations for the Government’s flood insurance programme, Flood RE, have been laid before Parliament. The programme will see the formation of a not-for-profit company that will allow high flood risk households to purchase reasonably-priced flood insurance.

But Ministers have opted to exclude small businesses from the programme – even though research by the FSB (Federation of Small Businesses) late last year showed that 66% of small businesses had been affected by flooding, drought or snow in the previous three years, costing them an average of £7000.

Many small businesses are unprepared and uninsured

The FSB’s research showed that 29% of businesses do not have insurance for business interruption (loss of income, costs incurred) or damage caused to property by flooding – but this isn’t surprising, when their findings also indicated that where small businesses have a risk of flooding, 9% say they have difficulty finding flood insurance, 3% say flood cover is unaffordable and 6% have been refused cover for flooding altogether.

The FSB’s new Severe Weather Report states that 93% of small businesses believe their business is threatened by severe weather, yet only 25% businesses with fewer than 10 employees have a severe weather resilience plan in place. Unsurprisingly, businesses that had already experienced disruption to customers, staff, utilities, transport and their supply chain due to flooding were most motivated to put resilience plans in place.

Small businesses have nowhere to turn, warn FSB

John Allan, National Chairman for the Federation of Small Businesses, said: “Without being included in Flood RE there is nothing in place to protect the smallest of businesses, which are the most vulnerable. With potentially no provision through the open market, firms will now have nowhere to turn and so will be at risk. Ministers should look again at the availability of affordable and comprehensive flood insurance for small businesses, potentially through a dedicated Flood Re style agreement.”

He added that the floods of 2012 cost small businesses an astounding £200m. “We cannot hope to create a buoyant economy if vulnerable small businesses are not sufficiently protected from unpredictable and severe weather that in the worst cases can close a business.”

His sentiments were echoed by Judi Brazkiewicz, chairman for the Federation of Small Businesses in Worcestershire, an area that has seen its fair share of flooding. She pointed out that moving is not an option for many small businesses, as they often rely on a local catchment area or simply cannot afford to move.

“This is going to have serious consequences for county businesses, many of which have been victim to flooding over the past few years. I just don’t understand why Government has chosen this path. On one hand they tell us that small businesses are going to be the salvation of our economic recovery and on the other they exclude them from the Flood RE scheme.”

Kara Copple
An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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