Failure to reach flood insurance deal is ‘playing with people’s lives’

Government accused of game of bluff with insurers as thousands of flood-risk properties could soon lose cover reports The Guardian on 31 March 2013. The chairman of a national charity that helps householders affected by floods has accused the government of “playing with people’s lives” as it looks increasingly likely that thousands of homes will be without affordable insurance from July.

Last week environment Secretary Owen Paterson admitted he was disappointed at failing to secure a new agreement over the insurance of homes and businesses at high risk of flooding. The government has been locked in talks with the insurance industry for months over the future of flood cover as the existing agreement – the Statement of Principles – runs out in June 2013. This agreement between the government and the industry obliges insurers to offer flood insurance as part of standard policies at reasonable rates, providing the government invests in flood defences.
The two sides are trying to thrash out a new arrangement, but talks seem to have stalled. In the latest twist to the tale, Paterson raised hopes last week when he was also reported to have said that the Statement of Principles would “almost certainly” be extended beyond June. However, the Association of British Insurers denies this, even though the Department for Environment, Food and Rural Affairs confirmed to The Observer that “a temporary extension is one of the things that is being looked at”.

By contrast, an ABI spokesman said: “No, the statement of principles will not be extended. The only way that would happen is if we do reach an agreement before June and the government needs to continue the current arrangement as part of a transitional period while it puts in place legislation. Otherwise, insurance will revert to a free market.”

A free market would essentially mean insurers could charge what they like, and many householders would find themselves in effect unable to obtain home insurance.

Charles Tucker, chairman of the National Flood Forum, said: “Shame on them [the government] if they’re playing a game of bluff with insurers to see who blinks first. They are playing with people’s lives, the value of their property and – ultimately – their sanity. Thousands of people are desperately worried about the cost of insurance in the future. This will continue until there is an agreement.”

Diana Johnson, Labour MP for Hull North, an area hit heavily by floods in 2007, said she had repeatedly tried to gain assurances from the government over what will happen next.

“A lot of people are renewing their cover for a period that extends beyond June and are already finding their premiums have shot up hugely,” she said. “By not sorting this out, the government is also putting people in a position where they will not be able to sell their homes because those homes cannot be insured.”

Insurers have proposed setting a levy on all policy holders of around £8 to create a £150m-a-year fund to cover those at high risk of flooding – but the government is understood to be reluctant to provide any additional funding that could be required on top of this in the case of extreme flooding.

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