Homeowners living in high flood-risk areas of the UK should now be able to save hundreds of pounds on their insurance premiums.
A new scheme called Flood Re has been designed to cut bills for those whose homes are in danger of flooding.
Up to now, thousands of householders have been paying large additional premiums to make sure their homes and possessions are protected.
About 350,000 homes could benefit – although thousands will be excluded.
The cost will ultimately fall on ordinary policy-holders, who will pay an extra £10.50 on their premiums on average.
As many as 15,000 homeowners made insurance claims for storm and flood damage last winter.
Insurance companies should now be able to lower premiums, as they can pass on the flood risk element of policies to the reinsurer Flood Re.
Householders who are eligible will also see their policy excesses – the amount they have to pay towards a claim – capped at £250. Previously, some people had to pay several thousand pounds towards repairs.
However, houses built since 2009 will not be covered by the scheme. This was done to discourage developers from building on land at risk of flooding.
Businesses are also excluded, as are landlords who take out insurance policies on homes they do not occupy themselves.
The scheme has also been criticised by a group of climate change experts, who said it did not offer good value for money.
“It achieves very poor value for money because it is trying to subsidise the costs of flooding, rather than addressing the causes and trying to prevent flooding in the first place,” said Daniel Johns, head of adaptation on the Climate Change Committee (CCC).
|Biggest flood risk areas in the UK
|Homes at risk
|% of UK total
|Yorkshire and Humber
|source: Flood Re
Initially 17 insurance companies are taking part in the scheme. If necessary, they can pass on any flood risk to Flood Re, which has been funded by the insurance industry as a whole.
Its costs will be covered by an industry levy of £180m a year. Most insurance companies are expected to pass on that cost to their customers, raising average bills by around 2%.
But Brendan McCafferty, chief executive of Flood Re, said flood-risk consumers should benefit from greater choice and more competition.
“This should make flood cover more affordable and accessible to those in high flood risk areas over time,” he said.
However, consumers will not need to contact Flood Re directly, as this will be done by existing insurance companies.
Shira Kimmerling, whose home in Hebden Bridge was flooded on Boxing Day 2015, was previously unable to afford insurance.
But she told the BBC that, under the Flood Re scheme, she would now be able to pay for cover.
“I think it’s wonderful news,” she told the Today programme on Radio 4.
“But after all, it’s not a very sustainable and cost-effective plan in the long term. We need to invest in flood resilience.”
Those who have already taken out household policies are being advised by the Association of British Insurers (ABI) to talk to their providers.
If they want to switch to a cheaper policy, they should ask if it is possible to avoid cancellation charges.
But the ABI also said there was no rush to change policies immediately.
One of the firms taking part, Axa Insurance, said it would embark upon a proactive contact campaign “to ensure that the impact of Flood Re for the most exposed is felt as soon as possible”.