Floods cause car insurance hike

Last updated: Aug 09, 2007

Most people would expect home insurance to rise if you have been flooded and to be hit in next years premium, but insurers up and down the country will be factoring the cost of the floods into everyones home insurance not just those who claimed. Worse, the cost of the home insurance flood claims will most likely affect car insurance premiums as well.

This is just a consequence of how the insurance companies work, where their risk is shared across all their portfolios. Even if your insurer only does car insurance and not home insurance (there may be a few out there) because of the way reinsurance works you will still probably be affected. Reinsurance is where insurers insure themselves against the cost of having to pay out too much money in a particular year. So the reinsurers may hike their premiums leading to your insurer hiking yours.

One the positive side, insurance is such a global market and there are so many global insurers and reinsurers, that local problems like the floods may be evened out and have a far smaller impact than say the insurance cost of 9/11 or a particularly bad hurricane season in the US.