Personalised business insurance
As we periodically see from the news coverage of major flooding events, the natural power of water is destructive and unforgiving; devastating property and risking peoples' lives. The effect of floodwater on businesses can be equally formidable, with stock, equipment and premises lost to the power of nature.
While there is nothing that can be done to stop flooding entirely, there are several key steps any business can take to help mitigate the effect of a flood and reduce the risk that such an event will pose to your company. Also, should a flood occur, there are important steps your business can take to make sure that the impact of the water is minimal and doesn’t cause your business long-term damage.
Read on to explore our guide on how to protect your business from flooding and the potentially destructive power of nature.
Flooding is on the rise
Flooding has existed for as long as the planet has and floods have periodically caused major damage and disruption to communities and businesses throughout history. However, if the situation was bad before, things are only predicted to become more severe over the coming decades.
It is starting to become common knowledge that anthropogenic (human-induced) climate change is causing a surge in extreme weather and, in turn, the risk of flooding. As extreme weather events become more frequent, and winters become colder and wetter, the impact will inevitably be felt by people and businesses at a local level. Indeed, Emma Howard Boyd, chair of the Environment Agency, commented in October 2021 that “the climate crisis is global, but its impacts are in your village, your shop, your home”.
Global temperatures are predicted to rise significantly over the next century. Many models predict that without drastic intervention, the earth will warm by 2.5°C, with the COP26 UN Climate Conference in 2021 setting the target of limiting warming to 1.5°C. Even at the lower level of global warming, extreme weather events will become significantly more common, with dangerously heavy rainfall leading to increased flooding. Also, with sea levels predicted to rise by nearly three feet over the next century, significantly more low-lying coastal areas will become at-risk from tidal or storm surge flooding.
The cost of flooding to businesses in the UK
It is not necessarily commonly known that flooding is the single most widely destructive force of nature. Indeed, business premises are more likely to be destroyed by flooding than by fire, wind or an earthquake, and this destruction comes at a significant cost. Engineering consultancy firm Sanderson Associates have provided data which suggests that the average cost of fire damage to a commercial building is £7,300, with losses from a burglary averaging at just £1,033. Flooding, meanwhile, causes an average of £28,000 worth of damages per property, per incident. Indeed, the scale of the problem is also huge with upwards of 185,000 commercial properties classified as at risk of flooding in England and Wales alone.
During the particularly bad 2015-16 winter flooding season, estimates by the Environment Agency put the cost of insurance payouts to businesses for flood damage at over £500 million. Businesses will usually make up between 10% and 30% of flood damaged properties seeking insurance payouts. However, in a particularly bad winter, such as 2015/16, this figure rose to 50%.
While this may seem to paint a bleak picture for businesses, the reality is that with concerted flood mitigation efforts and robust business continuity plans, the Environment Agency concludes that “most businesses can save between 20 and 90 per cent on the cost of lost stock and movable equipment”.
What can you do to protect your business?
Research the flood risk posed to your business
One of the first steps you can take to mitigate your exposure to the long-term risks of flooding is to understand the nature and extent of the risk in your local area. The government has a useful tool for checking what the risk of flooding is in your area, based on entering your postcode. This will let you know whether your business premises are at a low, medium or high risk of flooding, either from surface water or from river and seawater.
The different causes of flooding are important to help understand how your business could be threatened. Flooding usually comes from one of the following four sources:
- Rivers (fluvial)
- Surface water
- Coastal sources
It’s worth remembering that your business could be based on higher ground, far from a river or the coast, but still be at risk of flooding in the event of extreme rainfall and overwhelmed drainage systems.
You are also able to sign up to flood warnings by text or email that will let you know if flooding is expected imminently in your area, 24 hours a day. This important tool can help you get important business equipment out of a flood-prone building before it’s too late.
Create a flood plan
Part of preparing thoroughly for the possibility of a flood hitting your business is creating a flood plan - putting down all the important details in black and white. This document should be easily accessible to you and all your staff and include easy-to-digest information about how to prepare for a flood, as well as how to react if such an event occurs.
A good business flood plan will outline:
- Evacuation routes
- Location of important documents
- Details of stock and electrical equipment
- Flood warning details
- Gas, electricity and water supply details (including location of fuse boxes and gas cutoff valve)
- A contact sheet of personnel and their responsibilities in the event of a flood
Floodhub have created a useful Flood Plan Guide that will help you in identifying what needs to be include in your flood plan, ensuring you have all areas covered.
Create and review your company’s business continuity plan
Your flood plan will cover important actions that you should take when a flooding incident strikes, however, your business activities are likely to be impacted even after the flood waters have receded. Ensuring that your business is able to continue operating in some form can reassure customers and investors and enhance the reputation of your business.
That’s why it’s crucial, especially if your business is in an area that is prone to flooding, to create a business continuity plan as well. The Federation of Small Businesses (FSB) has created a helpful guide to creating a business continuity plan which could help your business survive and even thrive during a major period of disruption, such as the aftermath of a flood.
Insurance plays a significant part in business continuity. Superscript’s business interruption insurance is designed to provide financial support if you do experience downtime because of an unexpected event such as a flood.
Insurance for flooding
As mentioned above, the payouts to businesses by insurance companies for flood damage can, in one bad winter, exceed £500 million. With the costs of repair and replacement often extremely high, business insurance sits at the very heart of whether or not a business might survive their premises being flooded.
There are several different covers that you should consider that can significantly help your business overcome the obstacle of a flood:
- Employers' liability - a mandatory cover for most business with employees, this will cover your liability if a staff member is injured during a flood.
- Business equipment - from phones and laptops to specialist tools of your trade, this cover protects the equipment that your business relies on, should it be damaged or destroyed in a flood.
- Business interruption - key for business continuity, this cover can guarantee your business’ projected profit for a period when your premises are uninhabitable.
What to do after a flood
Even if you have taken all the precautions mentioned above, when flood waters rise there is often not much that can be done to hold back the power of nature, and even the most well-prepared businesses can be affected. It is important to spring into action straight away to reduce the impact of the flood.
Prioritise yours and your employees’ safety
First and foremost, if you are working in your business premises when a flood strikes, safety is the immediate priority. Evacuate staff according to your flood plan and inform family and next-of-kin that you and your employees are safe.
Secure and remove equipment, documents and stock (if possible)
Start by removing equipment and documents to higher ground if it is safe and practical to do so. At no point should you ask staff to put themselves in any potential danger to protect the business. Your business equipment insurance will cover the cost of replacing damaged office equipment and any tools of your trade up to your policy's limit so it’s not worth risking anyone’s safety to recover them.
Contact your insurance provider as soon as possible
As soon as your business has been affected by a flood, contact your insurance provider as soon as is practically possible, even if you don’t know the extent of the damage yet. You may be able to access immediate business interruption cash.
Document the damage with photos and videos
When it comes to making a claim with your insurer for the cost of the damage caused by a flood, the more evidence of the damage you can provide through photos and videos, the quicker and easier the claim can be handled.
Implement your business continuity plan
As mentioned above, a business continuity plan may allow you to continue operating in some form even if your premises have been flooded, such as working remotely if your offices have become inaccessible.
This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
We've made buying insurance simple. Get started.
- 28 November 20236 minute read
Freelancers and the self-employed pay their National Insurance contributions a little differently to people employed by a company. Read our guide to the ins and outs of how National Insurance works for the self-employed.
- 21 August 20235 minute read
Claiming on your business insurance policy can be nerve-racking, but there are many things you can do to have a smoother experience. Charlotte, one of our in-house claims experts, shares her top tips for making a business insurance claim.