Worries over uninsurable properties during floods

11th May, 2012

The worry of households being unable to obtain insurance cover for properties in flood risk areas has led to the Council of Mortgage Lenders to request urgent talks with the Government.

In its latest newsletter, the CML has pointed out that the problem of having a home uninsurable due to its likelihood of being flooded during the year is now an even greater worry to homeowners since the bad flooding in 20000. In that year the cost to the insurance industry as a whole was more than £1billion, more than 10,000 properties were flooded after heavy rainfall. Figures from the ABI show that the floods of 2007 cost the insurance industry £3bn in claims. This was more than five times the amount paid out in 2011.

During 2008 the government and Association of British Insurers (ABI) formed a “statement of principles” which was an agreement to allow homeowners in flood risk areas to still be able to obtain household insurance to cover any flood damage.

The government undertook to provide improved flood defences but insurers have not guaranteed to provide cover where the flood defences in a particular area are not due for improvement measures to be implemented. The “statement of principles” was not, according to the ABI, meant as a long term solution and they are no longer obliged to continue with the current arrangement beyond June 2013.

A spokesman from the CML said: “Most households take out insurance policies annually, so uncertainty about the availability and cost of insurance cover after June 2013 may begin to affect households in areas prone to flooding from the early summer of 2012 onwards.

"Without a clear lead from the government, it may be difficult to ensure that flooding insurance is widely available, at a reasonable cost. Uncertainty could begin to affect lenders and borrowers in the coming weeks. We are therefore keen to begin discussions with the minister and insurers to explore what can be achieved”.

 

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