York’s Flooding Insurance Conference calls for national action

10 May 2013 @ 8.36 pm
| News

Council leader James Alexander addresses the flooding conference. Photographs: City of York Council

Issued by City of York Council

City of York Council has today (10 May) hosted the UK’s first dedicated flooding insurance conference calling for action to those at risk of being denied affordable, appropriate insurance.

Councillor James Alexander, leader of City of York Council, introduced representatives from the Association of British Insurers, the National Flood Forum, members of the UK’s insurance businesses and the Federation of Small Businesses and Mary Creagh MP, Shadow Environment Secretary.

Looking ahead to the expiry in June 2013 of the Statement of Principles, the voluntary agreement between Government and the insurance industry that ensures that flood risk is incorporated in to household and small business insurance, the council wants to explore how major insurance companies, supported by the Government, can help those residents and businesses.
Councillor James Alexander, leader of City of York Council, said: “We want to raise the profile of this important issue that affects thousands of people locally, and millions of people across the country. Government has to take decisive action on the real and worrying problems residents and businesses sited on flood plains face.

“Premiums could rise next month unless ministers strike a deal with insurance firms. Residents tell me they fear that if an agreement isn’t found, they won’t be able to afford insurance and, at worst, couldn’t sell their homes.”

City of York Council’s Flood Conference panel, left to right, Mary Creagh MP, Cllr James Alexander, Matthew Cullen, Paul Cobbing, Tim Lazenby, Towergate Insurance, John Allen and Katharine Knox
City of York Council’s Flood Conference panel, left to right, Mary Creagh MP, Cllr James Alexander, Matthew Cullen, Paul Cobbing, Tim Lazenby, Towergate Insurance, John Allen and Katharine Knox

Mary Creagh MP, Shadow Secretary of State for the Environment, Food and Rural Affairs, said: “Every £1 invested in flood prevention saves £8 later, not to mention the human trauma that is avoided. Cuts to flood defences also affect the availability and affordability of flood insurance.

“They opened the door to the insurers walking away from insuring properties in areas of high flood risk. There are five million homes at risk of flooding in Britain. The ABI classify 200,000 of them as high risk.”

She said that across the region, people are worried about the rising cost of flood insurance and cited a business whose insurance excess had risen from £500 to £250,000.

“We know that there is only one serious option on the table: the Flood Re model put forward by the ABI. This is a new fund established which will insure the 200,000 highest risk homes at a set price. Where insurers can offer cheaper cover, homeowners will be part of a free market, but for high risk properties, insurers will pass the cover to Flood Re and policy holders will be charged the set price.

“The Flood Re pot will then pay for the costs of claims for high-risk customers. The Flood Re pot will be funded by the set price fees from high-risk properties and a contribution from all home insurance policies in the UK. This will make explicit the cross-subsidy that already exists in every insurance policy.

“However, the ABI says that the fund also requires an ‘overdraft facility’ provided by Government in case the pot is emptied in the early years of the scheme, due to a large-scale event such as the 2007 floods.”

Matthew Cullen, the Association of British Insurers’ policy adviser on flooding, outlined the Flood Re option. He outlines how the Flood Re would offer set-price flood insurance based on council tax banding, with lower value homes having lower cost insurance. The Floor Re pot would need to be topped up by fund taken from a levy of between £3-£5 per policy from the insurance industry.

John Allen, chair of the Federation of Small Businesses said: “The FSB has said that it is unacceptable that small firms are paying out thousands of pounds because they cannot get adequate insurance protection.

“In November our out-going National Chair John Walker met with affected members and James Alexander to discuss the problem and to re-iterate our calls to Government and the insurance industry to do all they can to assist small firms affected by floods.

“We are delighted to have attended the Flood Insurance Conference and hope this will be the first step forward to help small firms plan and minimise damage to their businesses.”

Paul Cobbing, chief executive of the National Flood Forum said: “The National Flood Forum supports and represents people at risk of flooding. We have been working with Government and the insurance industry for over two and a half years to encourage them to find a replacement to the Statement of Principles.

“However, things are now getting critical. There is seven weeks to go before the agreement runs out with no sign of a solution in sight. In the meantime we are getting increasing numbers of people calling us for help; people who are renewing their insurance and can’t get reasonable quotes and those who are struggling to move but can’t get insured.”

Katharine Knox, policy and research programme manager at the Joseph Rowntree Foundation, said that flooding has been identified as a direct result of climate change. She said it is going to become an even more important issue in the UK with more certain areas – particularly urban and coastal – being very vulnerable. She said that Yorkshire and the Humber is the most flood-disadvantaged region in England, and that an insurance agreement is needed that isn’t market-based.

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