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Small businesses and flooding: What are the options?

A flooded street in York

A flood is devastating if it happens at home, or to your business.

For small business owners, a flood can have a huge impact both emotionally and financially, with the potential for damage to stock and property, disruption to customers and staff, lost power, supply chain disruption, travel difficulties and ongoing costs if the business has to be shut for repairs.

Two thirds of SMEs surveyed by FSB in 2015 reported being hit by severe weather events in the previous three years - with hotels, restaurants, bars, catering businesses, transport firms, shops, construction and agriculture sectors among the most vulnerable.

Annual flood damage costs for the whole of the UK are estimated at £1.1bn.

But while homeowners in flood-prone areas have benefited from the government-backed Flood Re scheme, a joint initiative with insurers aimed at making flood insurance more affordable, it does not cover businesses.

When it is time to renew their insurance policy, SMEs can find the cost going up. FSB research suggests that 75,000 smaller businesses could struggle to find affordable insurance.

Of course, insurance is only part of the solution and the FSB campaigns on issues like long-term strategic investment in flood defence funding and strategic river management. 

But there are some insurance options out there to consider if your business is at risk.

The British Insurance Brokers' Association (BIBA) launched a commercial insurance scheme in 2016 aimed at improving access to flood insurance for SMEs in flood risk areas.

It takes a close look at the risks of a commercial property using advanced flood mapping technology, to generate a price for a policy for that property. It also recognises any flood resilience measures installed by the business in its pricing structure and offers "excess buyback" which allows customers to pay a higher premium in return for a lower excess.

BIBA’s members have used a scheme with R+Q to insure a range of businesses at risk of flooding including care homes, furnishing and catering companies, a chiropractor, pubs, cafes and estate agents and "has more than £400m of property damage, including business interruption, on risk with the scheme".

The FSB launched its own insurance broker for members earlier this year - FSB Insurance Service.

David Perry, managing director at FSB Insurance Service, said they can advise on schemes that can potentially "help businesses lower the overall cost of their premiums and make claims process easier if there is a flood".

He says there are insurers who can help with businesses at risk of flooding, although it does tend to be expensive. FSB Insurance Service is also partnering with FloodFlash, an "event-based" insurance policy which pays a fixed sum when floodwater reaches a pre-agreed trigger level, measured by an internet-connected water sensor.

Paul Cobbing, chief executive of the National Flood Forum charity said while the various schemes out there would work for some - they would not be right for all businesses.

The National Flood Forum played a role in setting up Flood Re for homeowners, but says businesses need more help.

Mr Cobbing said: "Flood Re is good because it's a systemic approach, it's not perfect but there are lots of people who have benefited, what we haven't got is anything equivalent for businesses."

He says the National Flood Forum can advise micro and small businesses about how the insurance system works and suggests SMEs find out if there is a local flood action group in their area: "Bringing people together with a common agenda makes you much more powerful."

Mr Cobbing added: "You never eliminate the risk (of flooding) but you can better understand it, better manage it and reduce that risk."

In August the Environment Agency contacted hundreds of businesses in Tyne and Wear, Durham, Darlington and Cleveland about preparing for flooding.

It advises businesses to understand the different types of flooding - rivers, coastal, surface water, sewage and groundwater - check their flood risk, check their insurance level, write a flood plan and invest in flood protection measures.

Most businesses can save between 20 and 90 per cent on the cost of lost stock and movable equipment by taking action before the winter, the Agency says.

FSB Insurance Service’s advice to small businesses at risk of flooding is to be prepared. 

The FSB Insurance Service website suggests practical measures like moving essential business equipment and files to a higher level, investing in flood barriers, and flood-resistant property upgrades.

But the company acknowledges that many small businesses will not be able to afford to install porous driveway material and flood-resistant wall plaster.

"One of the best things they can have is to get a solid business continuity plan in place," David Perry said.

"We suffered a basement flood in our building and we moved what we could across the road to a hotel. Because we had a business continuity plan in place, we were able to move in the space of a morning and we were back up and running and the impact on [customers] was very negligible."

Small businesses should also consider taking out business interruption insurance, which covers loss of income after a flood - for example lost earnings because offices have closed or problems with deliveries if access routes are flooded.

David Perry added: "Business interruption can be quite a major issue and one a lot of small businesses will have as a luxury item on their insurance because it seems quite obscure."

FSB Insurance Service has tips on setting up a business continuity plan, insurance and practical advice on its website

Other useful links:


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