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Flood insurance deal to cover homeowners

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The Association of British Insurers (ABI) and the Government have reached an agreement that ensures flood insurance remains widely available now and in the long term. The agreement outlines the actions that both Government and the industry will take over the long term. These include:

  • Improving understanding of flood risk
  • Government putting in place a long-term investment strategy, which will set out strategic flood prevention aims and assess future policy options and funding needs
  • Ensuring that the planning system prevents inappropriate development in flood- risk areas
  • Raising awareness in areas where flood risks are significant, encouraging property owners to take sensible precautions, and providing more information about how to obtain flood insurance
  • Promoting access to home insurance for low-income households

Implementing these steps should lead to a competitive flood insurance market, without the need for the Statement of Principles, which will therefore end in 2013. Until then, insurers will continue to:

  • Make flood insurance for homes and small businesses available under household and commercial insurance, where the flood risk is no worse than a 1 in 75 (1.3%) annual risk.
  • Offer flood cover to existing domestic and small business customers at significant flood risk, providing there are plans to reduce the risk to an acceptable level within five years.

    • Floods Minister, Phil Woolas, said, "The devastation caused by last year's unprecedented rainfall has shown just how vital it is for people to be able to insure their homes and livelihoods against the risk of flooding.

    "Working together we have succeeded in ensuring that flood cover is available in both the short and long term. I'm delighted that the industry has agreed to work with us to raise awareness and encourage homeowners to take steps to protect their homes where appropriate."

    Stephen Haddrill, the ABI's Director General, said, "This agreement is good news for everyone at risk of flooding. We are pleased that the Government recognises that a long-term investment strategy, adequately funded, is the best way to manage the growing flood threat. It will help ensure that the flood insurance protection, relied upon by millions of householders and businesses, remains widely available. We will continue to work closely with Government, and review progress each year."

    Simon Douglas, director of AA Insurance which has nearly 1m home insurance customers commented, "The Government is well aware that if they don't deliver promised flood defence investment, thousands of homes could become difficult or impossible to insure against flooding, leaving families in homes they could not sell.

    "Insurers are responding to the increasing risk of extreme weather and the likelihood that around half-a-million homes could be affected by flash flooding. Insurers are updating their risk assessments - the Environment Agency, for example, is working with insurers on new flood mapping that takes into account the effects of flash flooding.

    "The important thing is that although some householders will see insurance premiums rising, most should still be able to obtain the cover they need."

    Council of Mortgage Lenders head of policy, Jackie Bennett, commented, "Insurance is an essential requirement for a lender to grant a mortgage. The agreement reassures both homeowners and mortgage lenders which is important in the current environment."

    Last year, 180,000 homes were flooded, costing insurers around £3 billion in claims.

    14 July 2008 © Moneyextra.com

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