ONE HEADLINE seems to be making an all-too-unwelcome appearance in the media: “More homes devastated by floods.”
While insurers are counting the £20 million-and-rising cost of claims by washed-out Scottish homeowners, the Association of British Insurers and the government have become embroiled in a very public spat on whether such homes will be insurable in the future.
A “statement of principles” – agreed between the insurance industry and the government in 2000 – ensures that homes in flood-prone areas can still obtain cover. Part of the deal was that the government would continue to invest in flood defences,but such spending, in real terms, has fallen.
Given the agreement expires in June – only seven months away – time is running out to resolve the dispute. Homeowners who have watched their lives washed away by muddy torrents must be wondering whether they will ever be able to insure their homes again. If they can’t get insurance, then they will find it difficult to obtain a mortgage and, in turn, will see the value of their homes plummet.
It’s not as if there hasn’t been plenty of time to sort this out. After all, it was the previous administration that agreed back in 2008 (just a year after the disastrous 2007 floods) that the statement of principles would end in June 2013 and to find a more permanent way forward. It has been raised in parliamentary questions a few times, prompting some inter-party mud-slinging in the process. None of this inspires confidence that a solution will be found soon.
But surely the best protection is not to build on flood-prone land, which has increasingly been happening, while also investing in flood defences.
So far as the latter is concerned, it’s hard to imagine a better potential return. For instance, the £35 million investment in defences around Carlisle after it was inundated in 2005 has more than paid for itself. More than 1,500 properties have been spared flooding this time around and there are similar stories elsewhere around the UK.
A more modest £1m flood alleviation scheme has just been authorised by Perth and Kinross Council at Comrie, which could have saved several homes flooded two weeks ago. Nevertheless, it is likely to more than pay for itself by keeping homes dry in future. But the cost isn’t just in the tragedy of homes ruined, but also loss of trade, damage to the infrastructure and longer-term effects on the local economy.
The Met Office reported last week that less rain has fallen this November than in previous years, yet the devastation has been plain to see.
The “soft, refreshing rain” we are used to is now more likely to come in tropical-style bursts, but we have built on more of the land that absorbed the water and slowed its progress to the river system. Not only that, we have also improved drainage to speed the water on its way – only to swell river levels when it gets there.
This all leads to higher insurance costs for everyone, not just those affected. Even so, home insurance does remain competitive: premiums have on average increased by about 25 per cent since 1994, although most of that has been in the past five years, according to the AA’s British Insurance Premium Index. And premiums for home cover will continue to rise, although nowhere near at the rate we have seen in the motor market.
UK home insurance is almost unique in that flood cover is automatically included – elsewhere in the world it is bought as separate cover, so we have a lot to be thankful for. But while the hot potato of future insurance cover is passed to and fro, most meteorological experts say we can expect more of the same weather and worse: yet the government is calling for land twice the size of Greater London to be released to meet future housing needs.
But great care must be taken not to make the flood problem worse. Local authorities must not allow more homes to be built on the damp meadows and fields that play a vital part in controlling the natural cycle of rain dispersal and government must up its game on flood defence investment.
• Ian Crowder is an insurance expert for the AA