Victims of the widespread flooding that hit the UK during the autumn of 2000 will have by now repaired their homes and replaced possessions lost, but the problems drag on.
Through gritted teeth, insurers paid out in excess of £1.4bn in claims and it seems they are unwilling to do so again. Insurers are currently bound by a moratorium agreed by the Government and the Association of British Insurers (ABI), that does not permit them to amend cover for existing policyholders until January 2003. From then on, they are at liberty to restrict cover as they see fit, whether that be by increased premiums, excesses or refusing cover altogether.
Of course it is unclear what actions insurers will take, however, Halifax subsidiary Esure has already announced it is no longer offering flood cover to any homeowners, irrespective of their address.
Insurers’ refusal to cover certain properties from the risk of flooding could cause untold damage to the property market by making some properties unsaleable as lenders will not offer a mortgage on an uninsured property. Property prices would fall and existing homeowners could be left with negative equity.
Insurers are not expected to pull out of the market en masse, but policyholders could still see massive hikes on their excesses ‘ one industry expert estimated excesses could rise to a massive £8,000, but this too could put off potential buyers.
It is ultimately the Government’s responsibility to improve the UK’s flood defences. Fortunately, this is a problem it is taking seriously and Chancellor Gordon Brown has announced the Government will stump up £150m over the next four years.
But as ever it is too little too late. The Government has 10 years to implement improved flood defences, but the insurers’ moratorium runs out in less than six months.
Come January we can expect to see a huge outcry if insurers do look to limit cover in flood risk areas ‘ but we have to remember that insurers are not responsible for this problem, they are simply providing financial support to the victims of flooding. The UK is already facing a housing shortage and it is time for the Government to put this investment to good use to improve protection for homes in flood risk areas ‘ and fast.