Rain should focus government on home insurance

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."