UK flash flood potential brings further risk of underinsurance exposure

Heavy rainfall on Thursday has increased the prospect of flash flooding across parts of the UK and could expose existing property underinsurance where buildings are damaged, BCIS has cautioned.

The rapid shift from exceptionally dry weather to intense rainfall means property owners face risks at both ends of the weather spectrum. Prolonged dry conditions have already heightened concerns around subsidence while heavy downpours falling on hard, dry ground can increase the risk of surface water and flash flooding.

Both scenarios have the potential to cause significant property damage and lead to insurance claims.

Cos Kamasho, principal consultant at BCIS, warned that policyholders can face difficulties following damage if their properties are already underinsured.

‘Residential and commercial property underinsurance is an established challenge across the UK. Where properties are underinsured, weather-related damage and subsequent claims made can expose a gap between the sum insured and the cost of repair or rebuilding,’ he said.

‘The more extreme and changeable the weather, the greater the potential for damage-related claims to expose existing underinsurance. That’s why using robust, up-to-date rebuild cost data to inform sums insured and support regular reviews is absolutely critical.

‘For brokers and insurers, this is an opportunity to help change the narrative. With access to robust rebuild cost data, they are in the best position to help clients make proactive choices, at policy inception and renewal.’

BCIS insights show that rebuild costs continue to rise despite the cooling in broad-based materials cost inflation seen in recent years.

Kamasho explained that this is partly due to rising labour costs following increases in employers’ National Insurance Contributions and the National Living Wage, alongside the impact of conflict in the Middle East on fuel and energy-intensive materials costs.

‘Disruptions to global supply saw Brent crude, an international benchmark of oil prices, stayed around the $100 per barrel for weeks after hostilities broke out between the US, Israel and Iran. Although prices eased following the ceasefire agreed in June, resumed conflict has since pushed oil prices up again. This is particularly important for energy-intensive materials, and for reinstatement work, which typically requires plant and machinery for demolition and site clearance, driving up project fuel costs,’ he said.

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