April 23 2014 Latest news:
Adam Aiken, Editor
Wednesday, February 1, 2012
Thousands of people living in low-lying areas across the east of England could face problems getting adequate flood insurance for their homes thanks to an impasse between the government and the insurance industry.
Under a voluntary agreement drawn up in 2000, insurers pledged that all homes with existing flood-insurance policies would be guaranteed continuing cover in return for government investment in flood defences.
But that voluntary agreement ends in June next year, and the Association of British Insurers (ABI) said it meant up to 200,000 households in England and Wales could face problems getting flood cover.
According to ABI analysis of Environment Agency data, Great Yarmouth is one of the areas most at risk, with nearly 5,000 homes there facing problems getting adequate flood insurance if nothing is sorted out with the government by the middle of next year.
Elsewhere, 1,140 households in the Suffolk Coastal parliamentary constituency could find things tricky, and there could also be significant problems in places such as North Norfolk (1,313) and North-West Norfolk (1,160).
“We are running out of time to make sure that people in high-risk areas are properly protected from the devastation flooding can cause, and the ball is now in the government’s court,” said ABI director-general Otto Thoresen.
“Insurers want to make sure that every home has access to affordable insurance, should the worst happen, and we’re concerned that those people most at risk will lose out unless the government considers a safety net.
“We are frustrated with the progress of our talks with the government on this issue and want it to look urgently at a model that would allow flood cover to remain widely available and competitively priced.”
He added: “We are not arguing for a subsidy to benefit insurers. We want a long-term solution, negotiated constructively with the government, that will help the insurance industry continue to protect 200,000 at-risk households.
“No country in the world has an entirely free market providing universal affordable flood insurance, and action is needed now to avoid 200,000 high-risk homes struggling to afford cover.”
The warning from the industry comes as MPs raise concerns over whether there is enough money to maintain and improve flood defences to protect at-risk homes in the future, with the Public Accounts Committee this week warning that it was unclear “where the buck stops” for managing the risk of flooding.
Meanwhile, the growing threat of flooding was highlighted in a key climate-change report published yesterday.
The UK Climate Change Risk Assessment – which said there was “compelling evidence of the need to increase our resilience” – said flooding was one of the key threats to the east of England.
Simon Douglas, director of AA Insurance, said: “Flood protection is a national priority, yet many people in flood-prone areas may find their homes difficult to insure from later this year.
“Some insurers are telling us that flood-prone homeowners might not be able to renew their cover later this year, because their new policies will extend beyond July 1, 2013 [when the voluntary agreement comes to an end].”
However, some insurance experts said the practical impact would be less dramatic, and the worst-case scenario of thousands of properties becoming uninsurable was unlikely. Some insurers might withdraw cover from existing customers, but other insurers might step into the breach.
Aviva underwriting director Simon Warsop pointed out that even under the current agreement, there was nothing that prevented insurers from setting their own premiums.
Meanwhile, high-risk properties that were not already insured have never been protected under the voluntary agreement, yet the majority of these customers had still managed to find insurance cover.
But Mr Warsop agreed with the ABI’s call for government action, whether through greater investment in flood defences or by stepping in as the insurer of last resort.
“The industry has kept its side of the bargain but the government has not done what it said it would,” he said.