Minister: High flood insurance prices are unacceptable

Author: By Paul Waugh Deputy Political Editor

Elliot Morley, the floods minister, has called on insurance firms not to withdraw cover from flood-prone homeowners and warned them not to blame higher premiums on the Government.

The Association of British Insurers (ABI) is expected this month to announce its plans for Britain’s two million homes in flood risk areas, but already some companies have revealed they will end cover for some and put up rates for others.

After the 2000 floods, the ABI announced a two-year moratorium on any moves to withdraw cover in the worst-hit areas. The deal will run out at the end of this year.

Some firms are likely to allege that the Government has failed to build better flood defences since the disastrous floods of 2000, when insurers paid out £1bn in claims.

Mr Morley tried to forestall the allegations by some firms, pointing out that ministers had more than met the industry’s demands for new cash for defences and was committed to overhauling flood strategy.

He said £150m of extra funding was agreed in this year’s spending review, with 279 repair and improvement schemes approved in the past two years in England and Wales.

The increasing frequency of flooding, caused by global warming according to some scientists, has led the issue to soar up the political agenda.

On Monday, a new £2m publicity campaign, fronted by the broadcaster John Peel, will be launched by the Environment Agency to warn the public to be aware of flood risk.

Mr Morley said that every area affected by the 2000 floods now had repaired defences and, in many areas, new, strengthened defences were being built and planned. “Of course there are some out there who will want to put up premiums and they are trying to find someone to blame. But there is no reason why most people should not continue to receive cover,” this minister insisted.

He said that plans to overhaul the responsibility for flood defences, streamlining the current system that involves a number of different agencies, would be published next month or in November.

Planning guidance had been toughened to stop building on flood plains and now only a tiny fraction of planning permissions went against Environment Agency advice.

“The insurance companies know our detailed investment programmes. They set this target for investment which we have exceeded,” he said.

The new investment was being put in as quickly as the construction industry could allow, he added. The Institution of Civil Engineers had estimated that the latest three- year programme would generate work for an additional 300 civil engineers.

“We have met our commitments. Our capital programme is so great that you have to phase it in because you need more engineers and contractors. Even if I had more money, it couldn’t be spent because we’ve got to prepare for this. We are currently at the maximum capacity,” he said.

On top of the extra £150m announced this year for defences, some £106m was being spent on flood warning systems, including new schemes to alert those at risk via their mobile phones as well as home phone number.

Mr Morley accepted that, with a greater number of claims, some premiums would rise but his advice to homeowners was to shop around for the best deals.

“Every single area that was flooded in 2000 has had its defences repaired and strengthened. And most have new defences under construction. The numbers of people at risk from flooding are reducing all the time,” he said.

However, some insurance advisers are telling homeowners in high-risk areas to stay with their current insurers even if premiums rise, in case they are unable to obtain cover from another company.

A spokesman for the ABI said an announcement on its plans would be made in the next fortnight but he warned that there would be some people who would inevitably face increased premiums.

“Insurance companies can’t continue to provide cover where flood risk is inevitable. Insurance is, after all, about risk and has never been designed to cover certainties.

“There are a small number of areas where flooding is now an annual event. It isn’t just a question of money, we need to assess how good the infrastructure is,” he said.

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