We may all be forced to foot the bill for flooding (Irish Independent)

04 November 2011

Even if your house was not flooded in the past few days, you could end up paying for the dire weather that has been visited upon parts of the country.

Property insurance premiums have been tumbling for years now and the cynic might argue that insurance companies are waiting for an opportunity to increase them.

So the recent flooding might just give them the excuse they have been looking for to raise premiums.

One insurer we spoke to estimated that the flood damage could cost between €50m and €100m. That is a sizeable chunk of the €1bn property insurance market, made up of domestic and commercial insurance premiums.

Usually, the claims ratio for property insurance is about 60pc year on year, making that segment of the insurance market one of the more profitable.

The fear is that it could be higher this year, especially as the likely claims for this month's floods could be much higher than for flooding incidents in 2002 and October 2004. Then the flooding was localised, and many of the claims where for domestic damage, which tends to less expensive than commercial claims.

This time there is a mixture of commercial and domestic damage, and most of the flooding has been in Dublin, where property prices are highest.

If the pessimists are proved right, all premiums for property insurance will have to raise to pay for the damage.

Flash flooding is an act of God, but we as a nation do share some of the blame for the damage. Irresponsible planning, with insufficient attention paid to the risks of building on flood plains and too much pressure being put on our dated drainage system, are man-made aggravating factors.

Of course, global warning, or global storming, as it might become known, is also a huge factor.

Those who have already suffered flood damage will find they are paying hugely inflated premiums, if they can get any quote at all. Therefore, it is vital that homeowners check their policies and be certain they are covered in the event of a flood.

For the building, the sum insured should meet the rebuilding cost of the property, as opposed to the market value.

When it comes to contents, some insurers offer an automatic sum insured for the contents. But you may want to carry out your own audit to be happy that the sum insured is right.