What we know now

What do you do when you get a year's worth of insurance claims across Yorkshire in six-and-a-half hours? What do you do three days later, when you find out that one of the claims is for a housing association with 220 different properties in its portfolio - every one underwater and housing an elderly or vulnerable person? What do you do if you have an order book filled with claims that are every bit as important to policyholders, brokers and insurers as the ones that you have just received? These are just some of the questions that were asked of the loss adjusters and claims managers in June last year when the first flood hit.

In response, we made projections within a few days. We thought that we would receive between 11,000 and 13,000 claims and our forecasts were very accurate. What nobody could have predicted, however, was that a second event of the same severity over an even-wider geographical area would happen four weeks later.

We were facing two, one-in-50-year events within a month of each other, generating 25,000 urgent claims. Commercial property accounted for 5,000 claims and even the domestic ones entailed five figure settlements on average.

With no notice, people found themselves living somewhere else and they were unsure how long they would be there: whole communities were vulnerable. As regards businesses, it takes only one inch of water to close one for a week, which is long enough to lose customers; we saw properties where water had accumulated to a depth of six feet.

The financial exposure was huge. This was not just a test of a loss adjusters' ability to cope - this was a challenge to the credibility of the whole insurance proposition.

Security

I do not think that any of the 25,000 policyholders that we dealt with ever doubted whether or not their insurers would honour their obligations. There was no Northern Rock moment and that in itself is a great achievement, though not everything was perfect. As well as the many successes, the floods taught us some valuable lessons.

Insurers cannot ask policyholders to book their claims six weeks in advance, so neither can loss adjusters or brokers. If you receive a few flood claims in isolation then the chances are that you can dry those properties quite quickly. However, the scale of devastation last year dwarfed the market's capacity; there were not enough people to dry properties or to strip them out, let alone begin repairs.

We have one of the most sophisticated supply chains in Europe but it was not designed to cope with an event on this scale. The biggest difficulty that we faced was the independent application of each link: somebody has to do the drying, another the stripping out and another the repairs. There's an adjuster in that list somewhere too, yet we were all acting in isolation.

To the policyholder, it was not clear enough who was in charge and, on occasions, they lost confidence in their insurers even when everyone involved was working as hard as they could. This extended the lives of claims that, by their very nature, had long tails anyway.

There were gaps in cover, especially on commercial risks. Drying-out times were longer than average and the shortage of labour and the other inevitable consequences of damage on this scale prolonged the lead-in time to repair significantly. As a result, many businesses came to realise that the maximum indemnity period that they had selected was far too short and that sums insured were insufficient to provide full protection.

These factors need to be taken into consideration when advising businesses on adequate cover while supporting them with their business continuity plans. This is fertile ground for building strong relationships with customers; people understand far more easily that it is a good idea to use an umbrella just after they have been caught in the rain.

Today's economic pressure on businesses can mean that they view features such as denial of access, loss of attraction or customer and supplier extensions as non-essential, yet in the aftermath of the floods these features often proved critical in minimising the financial impact. We witnessed businesses struggling following the anchor stores of a major retail shopping centre taking months to re-open. This event in particular had a great impact on smaller retailer's custom, which is much more sensitive in the short term.

Preparation

The Chartered Management Institute found that only one-third of organisations had a business continuity plan for flooding and storms. On the ground, we certainly did not see enough business continuity planning. Sir Michael Pitt's report on how the industry performed during the floods states that property owners have a responsibility to protect their premises, however, take-up is not widespread and there needs to be more education.

In our experience, those businesses that recovered quickest tended to have a simple contingency plan in place at the minimum. We saw one business that had reached an agreement previously with a competitor that, in the event of damage, they would take on each other's customers and supply services without seeking to take long-term advantage. More often than not, policyholders and businesses might not want to pay for additional cover, yet brokers should advise their clients to think of the absolute worst when preparing business continuity plans, as bleak as that seems. For example, in the event of a flood, hidden damage beyond the property needs to be taken in to consideration because flooding can wash soil away, affecting the foundations of a building greatly and possibly adding further complications to rebuilding a business and its premises.

For the broker, the wake of such catastrophic circumstances presents an important window of opportunity; they should apply and share with clients the learning taken from events such as these to ensure purchase of the cover that they need, not that which they think they need.

Adjusters have a key role to play in support, applying a wealth of post-loss experience, which has just been further enriched. There are great benefits from pre-nomination of the adjuster, working in partnership with the broker from day one. We need to see more of these arrangements if the client is to enjoy the full support that the market can deliver and I believe that partnerships should be formed to create slicker solutions.

As we look over the last 12 months, brokers, adjusters, insurers and supplier partners should feel immense pride in all that we achieved in the aftermath of what was surely the industry's biggest test.

Phil McNeilage, chief executive officer, Cunningham Lindsey UK.