RAIN SHOULD FOCUS
GOVERNMENT ON HOME
INSURANCE, SAYS AA
-
Talks on
resolving flood
cover impasse
‘progressing’
-
Flood
risk families
looking for
certainty, AA
says
-
Once-in-a-century
home flood would
cost £200 per
year
Storms and heavy
rain this week have
led to yet more
flood alerts, once
again putting focus
on the apparent lack
of progress in talks
between the
Government and the
insurance industry
on future provision
of insurance for
homes in flood-prone
areas, says
AA Insurance.
Discussions are
still taking place
to find an
alternative to the
so-called ‘statement
of principles’ flood
cover agreement,
which expires in
less than a year.
Simon Douglas,
director of
AA Insurance
says: “There are
200,000 UK homes at
serious flood risk,
and 2.4 million
homes at some risk
of flooding from
rivers or the sea.
The majority of
them have been able
to insure their
homes thanks to the
agreement, but that
ends on 30 June next
year.
“There’s little sign
yet of a
replacement. These
families must be
wondering whether
they will be able to
find affordable
insurance from that
date and I’m
concerned at the
apparent lack of
progress.”
The Government and
the Association of
British Insurers are
locked in talks to
find a formula that
will ensure flood
cover is both
available and
affordable but
recent statements
from the Government
have not given much
ground for
confidence, Mr
Douglas says.
In July, the then
environment
secretary, Caroline
Spelman, said that a
way forward ‘had
been found’ but
didn’t elaborate.
Then earlier this
month, Department
for Environment,
Food and Rural
Affairs (Defra)
broke its silence in
a written response
to Conservative MP
Nigel Adams.
Defra secretary
Richard Benyon said:
‘A number of options
are under
consideration,
including an
industry-led levy
that would allow
policyholders in
high flood risk
areas to continue to
secure affordable
insurance…our
priority is to
resolve detailed
design
issues,’ adding:
‘Discussions with
the industry
continue to be
positive and further
announcements will
be forthcoming in
due course.’
Mr Douglas said that
whatever solution is
reached, it has to
be paid for if
affordable cover is
to be available to
the most vulnerable
homes. “With a
typical cost of
repairing and
refurbishing a
flooded property
running to around
£20,000, even if
such a home is
assessed as being at
a once in a century
risk of inundation,
that still amounts
to £200 per year, on
top of the normal
cost of insurance
cover.
“If 1 in 6 homes in
the UK are at some
risk of flooding,
especially given the
increasing number of
flash floods that
can happen almost
anywhere, that’s a
big bill to pick
up.
“The Treasury is not
likely to be
enthusiastic about
underwriting such a
risk. Who picks the
liability up is, I
believe, where
discussions may have
stuck.”
Notes for Readers
The ‘statement of
principles’ was
first made as a
temporary measure in
2000, between the
Government and the
insurance industry
through the
Association of
British Insurers (ABI).
It was renewed in
2003 and again in
2008 but expires on
30 June 2013. It
aims to ensure that
those in areas prone
to flooding could
still insure their
homes, provided the
Government continued
to invest in flood
defences. In most
other countries,
flood cover is
provided separately,
if at all, or is
underwritten partly
or wholly by the
government and
funded through the
taxation system.
Many commentators
believe there should
be a similar
solution in the UK
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