The cost of the winter floods across the UK will breach £5bn, with about a fifth of the bill falling on those with inadequate or non-existent insurance policies, a leading accountant has warned.
Many insurance policies will not cover the full losses in the hardest hit areas such as the north of England, according to KPMG, especially as a large number of homeowners will have increased the value of their properties’ contents over the festive period, with gifts and large quantities of food being kept in houses.
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Justin Balcombe, KPMG’s UK head of general insurance management consulting, said: “The scale of the flooding over the last few weeks has seen communities across large sections of northern England, Wales, Scotland and Ireland severely impacted. In 2007, when a similar pattern of flooding hit, total insured claims were £3.2bn, however, we consider that the actual financial impact far exceeded this. We are assessing this month’s events through a number of economic lenses, resulting in an initial total cost estimate of £5bn-£5.8bn.”
The accountants predict that insurance claims will total £1bn-£1.5bn, “under insurance” £1bn, repairing flood defences £2bn and local authority and infrastructure costs between £500m and £750m.
Meanwhile, changes within the insurance industry brought on by the latest raft of flooding claims will cost another £500m, KPMG said, while costs to businesses - such as “loss of attraction” which are not typically covered in insurance policies - will add another £50m-£100m to the bill.
Gary Lovatt, regional chairman of the Federation of Small Businesses in Cumbria and Lancashire, said: “I think you will see an increase in the numbers of people trading with no insurance, either because they can’t afford it or they can’t get it.
“In the meantime there is a knock-on effect to the problems. In areas that are now OK, there are businesses that need to trade. It is important not to scare people off going to Yorkshire, Carlisle, the Lake District and these areas.”
Balcombe added: “We believe that there is a serious level of under insurance and would estimate this economic impact to be as significant as the insured event, to the tune of an additional £1bn.”
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