Analysis: After the flood

Flood

  • Storm Ciara generated mainly windstorm damage claims, with a majority of flood claims stemming from the ensuing Storm Dennis.
  • The combined impact of the storms falls somewhere between that of 2018’s Beast from the East and the trio of Storms Desmond, Eva and Frank in 2015.
  • Insurers and loss adjusters mounted a wide-ranging response to the storms stretching across multiple regions including Wales, the Midlands and Yorkshire.
  • While storm damage claims will likely be settled by the middle of the year, the most severe flood claims may not be settled until the end of the year.

Storms Ciara and Dennis hit the UK on 8 and 16 February respectively, contributing to what was the wettest February since 1862. Post looks at the impact of the storms

Some areas saw four times their average rainfall for February, with the month’s deluge hitting 237% of the long-term average nationwide and 296% of the average across the North West of England and North Wales.

“In terms of both the number and cost of claims, for us it’s a greater event than the Beast from the East,” Jeremy Trott, head of claims operations for Allianz Insurance, told Post.

“You’d need to look back to Desmond, Eva and Frank in December 2015 to find a worse event.

“Serious flooding in South Wales and in places like Shrewsbury has really driven a lot of the cost.”

Insured losses

An Association of British Insurers estimate issued on 7 March pegged the total industry payouts for 82,000 claims stemming from Ciara and Dennis at £363m.

Flood claims, which numbered an estimated 8450, accounted for £213.7m of this sum, while 73,500 windstorm damage claims are expected to cost £149m.

The vast majority of payouts (£330m) are expected to come from property claims, domestic and commercial policyholders accounting for 56% and 44% respectively.

The ABI’s headline figure squares with that of Fitch Ratings, which predicted in the wake of Storm Dennis that UK losses from the two major February storms were unlikely to exceed £500m in the UK.

However, the ratings agency cautioned that the losses would nonetheless increase pressure on household insurers’ profitability, potentially pushing combined ratios north of 100% for 2020.

Europe-wide insured losses resulting from Storm Ciara – which caused significant damage in 17 countries – are predicted to surpass the $1bn (£786m) mark, with the upper limit of AIR Worldwide’s estimate sitting at $1.9bn.

Aon predicts the economic losses from Dennis and Jorge across the continent will run into the hundreds of millions and tens of millions respectively.

Widespread impact

In the UK, February’s storms contrasted with the trio of storms that hit Cumbria and the Scottish Borders in 2015 in the breadth of areas that they buffeted and drenched over two consecutive weekends.

In numbers

1862: February was the UK’s wettest month since 1862

82,000: The number of claims resulting from Storms Ciara and Dennis

£363m: The estimated total payouts resulting from the two storms

70%: The percentage of Sedgwick’s claims located in Wales, the Midlands and Yorkshire

400%: The volume of calls Direct Line received the Monday after Ciara hit

Alister Jupp, UK head of Crawford’s global technical services, said: “Instead of having a single event passing over where there’s a clearly defined affected area, such as in Cumbria in December 2015, here you had a much wider area affected for a lot longer.

“When properties were flooded, there were still over 200 flood warnings in place and flooding continued for some days.

“We’ve only just been able to gain access to some properties this week. That has been particularly bad in parts of Yorkshire: Snaith has been a particularly difficult area.”

Jessie Burrows, claims managing director at Direct Line, said: “The geographies were slightly different and the storms themselves are slightly different.

Ciara was much more a windstorm event rather than a
flood event, although we did get some flood claims, and it was much more concentrated in Yorkshire and the North.

Dennis was much more of a rainstorm and the impact was mainly the West and Wales.”

Direct Line has estimated that it faces £35m in claims costs from Ciara and Dennis, net of recoveries from Flood Re.

The sum makes the storms a far larger event for Direct Line than the floods in November last year, which cost an estimated £10m, but falls short of the £50m cost the insurer faced from 2018’s Beast from the East.

As of mid-March, Direct Line had received nearly 8000 claims relating to the two storms, Ciara accounting for around 5000 windstorm damage claims and 100 flood claims and Dennis 3500 storm damage claims and 400 flood claims.

Allianz meanwhile had received 1392 claims, Ciara generating 630 storm damage claims and 143 flood claims and Dennis 344 storm damage claims and 275 flood claims.

On the ground

On the on-the-ground response Allianz had to mount following the storms, Trott said: “Ciara was more of a wind event and generally, you don’t necessarily need as many people on the ground in a wind event as you would have in a flooding event.

Dennis was more of a flooding event, but we were able to get people on the ground quickly and respond to our customers.

“We’ve had lots of positive comments around how quickly we’ve responded, both ourselves and also our loss adjuster partners, in terms of meetings, visiting clients, and starting to progress claims and making interim payments.”

Burrows said: “We sent our field force to areas that were heavily impacted by localised flooding, to help our customers and also give advice to non-customers.

“We set ourselves up regionally. We’ve got about four to six branded vehicles available at any one time, and they’re strategically positioned around the country so that our people are visible.

“We had one in Carlisle, one in the Calder Valley in Yorkshire, one was stationed in Wales near the River Seven, and we had one in the south as well.”

Commenting on where there were difficulties responding, Jupp said: “The difficulty was identifying the hotspots and being able to get resources to where it was needed: ‘Is it going to be area A, was it going to be area B?’

Paul White, UK CEO at Sedgwick, told Post that the variety of areas affected had negated the need to redeploy resources to service one particularly adversely-affected region.

“The spread of the events was actually pretty good from a servicing perspective for us, because pretty much all of the UK was hit in some shape or form, and because we’re a national business, we’ve got quite a lot of capacity and resource,” he said.

“We have moved resources down to the key affected areas, but it’s not as bad as previous events where we’ve maybe had a localised flooding in places like Carlisle and we’ve have had to move resources across all of the UK to one location.”

70% of the claims Sedgwick dealt with were located in Wales, the Midlands and Yorkshire, with Wales and the Midlands together accounting for just over half of all claims.

As of mid-March, Sedgwick was dealing with around 10,000 claims related to Ciara and Dennis, of which roughly 8000 pertained to storm damage and 2000 to flooding.

Three-quarters of these were household claims, with commercial claims making up the remainders.

Call centres

The two back-to-back storms saw insurer call centres inundated with calls, with customers seeking information about their cover in addition to lodging claims.

Burrows said: “On the first Monday after Ciara, our call volumes were at 400% what we get on a normal day.

“We got back into what we would call a green status within 24 hours for Ciara and for Dennis that was within 36 hours.”

Burrows explained that key to dealing with these kinds of surge events is having the flexibility to reassign staff to different types of claims, which has been a focus for Direct Line in terms of training.

“We’re very keen on cross-skilling all our first notification of loss handlers, right across classes, which means if we’ve got a stress in home, I can move motor people there,” she said.

Trott said: “We’ve worked a lot of overtime, both in the evenings and on Saturdays, to ensure that we are keeping up with everything that’s coming in, but the work coming in is now double what it was a month ago.”

He also outlined the kind of work Allianz was able to do ahead of the floods in order to dampen the eventual surge.

“We’re very proactive in our communications,” he said. “For instance, after Dennis we were running daily reports using the Environment Agency flood alerts, highlighting customers that were in immediate danger and proactively contacting them and seeing whether we could assist.

“We contacted a motor trader and were able to talk to them about potentially moving their vehicles to different premises, which hopefully mitigated their loss.”

Settling claims

“The challenge we’ve got now is when the focus goes away is we’ve still obviously got a lot more claims outstanding than we had a couple of months ago,” Trott continued.

“We’ve planned quite carefully not just for the eye of the storm, but also for two weeks later, four weeks later when loss adjuster reports start to come in and these customers start needing our cash to keep their businesses going.

“All but the largest storm claims should be settled within three months. The flood ones are always more difficult, particularly because of the requirement to dry out buildings, but we’ve made good progress on some of the larger cases, and have made interim payments.”

Some of the flood claims which had seen the most severe damage may not be settled until the end of the year, according to White.

“The bulk of these claims are of a lower value, higher frequency nature, because they are related to wind damage, and I would expect us to get through 80% of these claims by the middle of the year,” he said.

“The flood claims will obviously take a little bit longer. Depending on the severity of the damage to the property, we could see claims running for six months and the most serious cases may last until the end of the year.”

Future storms

Looking ahead to how the response to these storms will inform the response to the UK’s next big weather event, Jupp said: “No two surges are the same, and you always learn lessons.

“One of the things that we’ve done more this time is around use of technology, which will be incorporated a lot more in our future plans.

“Things like 3D mapping of properties has gone down very well with insurers. Some insurers have asked us to do that across all their flood claims because they see the value of having 3D imagery of those particular properties for future reference.”

Another area to watch when the UK is hit by storms in the future is the effectiveness of the country’s flood defences.

White said: “The flood defences are having an impact. We’re seeing less claims across the piece, the damage is done in certain localised areas.

In March’s budget, Chancellor of the Exchequer Rishi Sunak made £120m available to repair damaged defences and doubled government investment in flood defences over the next six years to £5.2bn.

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