Flood insurance scheme under fire

Surface flooding on Rochdale Road, TodmordenSurface flooding on Rochdale Road, Todmorden
Surface flooding on Rochdale Road, Todmorden
Homeowners whose properties are repeatedly flooded will be ordered to pay for new defences to protect their homes or face ejection from the Government’s flood insurance scheme.

Aidan Kerr, head of property at the Association of British Insurers (ABI), said homes deemed “uninsurable” by the industry after being flooded on two or three occasions within a short space of time will be banned from accessing the publicly-funded insurance scheme unless they fund their own improvement works.

The announcement means yet another group of property-owners being excluded from the scheme – known as “Flood Re” – which was unveiled amid much fanfare by the Government in the summer after years of negotiations with the insurance industry.

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Under Flood Re, every household in the country will pay a small levy on their insurance premium to fund a pooled subsidy for those most at risk of flooding, to ensure they can still obtain affordable home insurance.

However, widespread concerns have been raised over recent weeks after it emerged small businesses and properties built after 2009 will be excluded.

Speaking before a committee of MPs yesterday, Mr Kerr said those homes deemed “uninsurable” owing to repeated flooding will also be thrown out if they do not undertake specific repair work.

“When we agreed the (deal with Government) in June, one of the principles our members said they wanted in there was this concept that if somebody is genuinely uninsurable, Flood Re shouldn’t be able to help them,” he said.

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Mr Kerr said the definition of “genuinely uninsurable” will be guided by whichever homes are repeatedly flooded after the scheme launches in June 2015.

“Flood Re will start to generate data which shows which properties are going to flood most often,” he said.

“What Flood Re will then try to do is say that when you have your repair work done the second time or third time – or whatever it is that Flood Re defines as a minimum number of times within a certain period that you flood – you will have to have a specific repair done. And only through doing that would you continue to have access to Flood Re.”

Labour MPs expressed concern about the proposal, and called for a right of appeal in case people are excluded unfairly.

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Shadow environment Minister Thomas Docherty said: “If for whatever reason Flood Re has decided they no longer wish to insure someone and that they are ‘uninsurable’, and they funnily enough don’t agree, what is the recourse? So that Flood Re doesn’t just get to chuck people overboard?

“I am genuinely concerned we are providing no mechanism where it’s possible that Flood Re has made a mistake.”

MPs also repeated concerns about the decision to exclude small businesses, despite reports of soaring premiums and six-figure excess levels for firms in West Yorkshire following recent floods.

Mr Kerr admitted there were cases in towns such as Todmorden where small and medium-sized enterprises (SMEs) now struggle to obtain insurance, but insisted there is no evidence of problems on a national scale.

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“Over the past few years we’ve built up a pretty compelling body of evidence that there is a systematic problem for households,” he said. “We simply haven’t got the same evidence base for SMEs.

“Compared to the household market, which is very much mass-market, SMEs tend to have more of a an individual relationship with brokers, and (insurance) products more tailored to suit their needs.

“The product is designed for them, and so you have much less of an affordability issue for SMEs.”