Insurer could pay out £140m in storm claims

Floodwater surrounds houses in Cawood, North Yorkshire after the River Ouse burst its banks. PRESS ASSOCIATION Photo. Picture date: Sunday December 27, 2015.  Photo: Joe Giddens/PA Wire
Floodwater surrounds houses in Cawood, North Yorkshire after the River Ouse burst its banks. PRESS ASSOCIATION Photo. Picture date: Sunday December 27, 2015. Photo: Joe Giddens/PA Wire
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DIRECT Line Insurance Group said it expects the three storms that lashed the UK last month will cost it up to £140m in customer claims.

It said more than 200 claims advisers have so far inspected sites damaged by high winds and flooding caused by storms Desmond, Eva and Frank in December, which struck parts of Cumbria, Yorkshire and southern Scotland.

The insurer said it estimates claims will range between £110m and £140m, hitting both its home and commercial divisions.

Home claims from the storms are likely to be between £80m and £100m, compared with a normal annual level of claims from major weather events of about £80m, the firm said.

Claims in its commercial unit are expected to be between £30m and £40m, which is between £15m and £25m more than in an average year.

However, the insurer said it still expects to hit its full-year existing combined operating ratio – a comparison of claims to premiums – of between 92 per cent to 94 per cent for claims from major weather events.

The announcement comes after an estimate that last month’s storm damage is likely to cost the insurance industry £1.3bn.

The Association of British Insurers said just over 3,000 families are now in alternative accommodation, and so far the industry has paid out £24m in emergency aid.

Almost 15,000 claims have been made for flood damage to property from homeowners and businesses, the ABI said. There are also thousands of smaller claims for storm damage.

The ABI said the average expected payout for each domestic flood claim is £50,000 – compared with an average from the 2013/14 winter storms of £31,000.

James Dalton, director of general insurance policy at the ABI, said: “In the immediate aftermath insurers have focused on urgent needs, providing families with somewhere to live and helping businesses into alternative trading premises.

“They get cash into the hands of those affected so they can buy food and dry clothes. Then they get the repair process under way as quickly as possible.”

The ABI added that so far the industry has made more than 8,300 initial visits by loss adjusters, who handle the most severe claims.

Last month, a survey by professional services firm KPMG concluded that the total economic impact of the flooding in Yorkshire will breach £5bn.

Justin Balcombe, KPMG’s UK head of general insurance management consulting, said in December: “The scale of the flooding over the last few weeks has seen communities across large sections of Yorkshire severely impacted. In 2007 when a similar pattern of flooding hit parts of the UK, total insured claims were £3.2bn, however, we consider that the actual financial impact far exceeded this.”

KPMG said its initial cost estimate for the latest floods was between £5bn and £5.8bn.

THE WETTEST December on record flooded 9,000 homes across Yorkshire, the Environment Secretary Liz Truss revealed earlier this month, as questions were raised about the Government’s commitment to flood defences across the region.

Outlining the true scale of the winter flooding which left homes and businesses destroyed, Ms Truss said the Rivers Aire and Wharfe were a metre higher than they have ever been and fixing the Tadcaster Bridge over the River Wharfe is a “national priority”.

Earlier this month, the Government also reiterated its belief that a £190m flood defence that could have protected Leeds from flooding was deemed ‘unaffordable’.