Housing Specification Blog

Is the Government doing enough to help flood victims?

July 12, 2012 PaulGroves Planning & Legislation

The Government has been quick to claim swift progress is being made in talks with the insurance industry on a new agreement on the future of flood insurance.

Environment Secretary Caroline Spelman revealed the new approach under discussion aims to improve upon the current agreement between the Government and the industry – the Statement of Principles – by ensuring both the availability and affordability of flood insurance for the first time.

As part of discussions, the Government is now considering how the existing cross-subsidy that takes place within the insurance industry can be adjusted to make sure insurance prices remain affordable.  Most insurance companies already raise a small sum from policy holders to cover the cost of insuring homes at high risk of flooding.  The insurance industry has asked the Government to formalise this arrangement, so that all households can continue to get affordable insurance, and to correct a current inbalance in the market whereby some insurers are at an advantage in being able to solely offer products to low risk customers whereas others currently have to offer cover to many high risk properties.

The Government is adamant that any new approach will not place extra costs on policy holders or the taxpayer, but instead will capture money already within the insurance industry by formalising the voluntary arrangements already in place.

The minister said:“The best and most sustainable way of keeping insurance affordable in the long-term is to help prevent flooding in the first place.  We are spending more than £2.1 billion on flood risk management, and are on course to exceed our goal to better protect 145,000 homes by March 2015.”

But is it enough? And more importantly, is there enough detail in the announcements made so far?

Giving the news a cautious welcome, Alan Cripps, RICS Associate Director, welcomed the latest moves. “Without this, by June next year, homeowners and businesses may find their properties are not only unmortgagable and unprotected from thousands of pounds of flood damage – but may also see their property severely drop in value,” he explained.

However, he also called the announcement “vague and unfair” and added: “Not only does this penalise homeowners in low flood risk areas, but it is forcing homeowners and families who are already under financial pressure to pay extra to their insurance companies. And there is no indication of how this extra money will be used or managed.

“Once again, the government is passing the buck and is leaving others to pick up the pieces.”

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