Flood insurance improvement but will it remove Cleator Mother’s Fear

Flood-risk households get closer to insurance guarantee“Comment on article-but will it remove the fear of floods, see statement below by mother and householder Rita Edge of Cleator, West Cumbria“: original article by Lisa Bachelor;    guardian.co.uk, Tuesday 8 May 2012 12.33 BSTFlood alerts remain in place in several parts of the country, but there is at last some good news for nervous householders in flood-hit areas who are a step closer to the assurance that their properties will continue to be insured.

The government is looking at two proposals put forward by the insurance industry that would see cover made available to all households, regardless of flood risk, and is set to announce its conclusions in the next few weeks.

The Association of British Insurers (ABI) is proposing that all homes continue to be covered, but with a cap on the annual premium they would pay. Any property with a risk priced above this cap would get its insurance from a central pool of money. This pool would be paid for by a small levy on every home insurance policy in the country.

“The government is now engaged in constructive and serious discussions about this idea with us, and we are doing the maths to work out what the level of cap and amount of levy might be,” a spokesman for the ABI said. “We think this system is the way forward and will address the issues of availability and affordability of insurance.”

The government is also considering a proposal called Project Noah, put forward by a firm of insurance brokers, which would allow insurers to transfer their residential flood risks, less a small retention, into the international reinsurance market.

“Industry-led solutions that allow insurers to compete even for the highest risk homes, without government intervention in the market, would give the best value for taxpayers’ money,” a spokesperson for the Department for Environment, Food and Rural Affairs (Defra) said.

Industry insiders now believe a combination of the two approaches is likely, and that an announcement will be made in June or July.

The implementation of either system, or a hybrid of both, would offer peace of mind to householders like Rita Edge who lives in the village of Cleator in Cumbria.

In 2009, Edge found herself in a near-death situation when the river that runs past her property flooded seriously for the first time in her, or her parents’, living memory. During a period of heavy rain, her garden flooded in the 20 minutes it took her to leave the house, collect her children from school and return. Her garden had flooded before, but she never imagined her house would also flood, she said, so she took her children inside.

“10 minutes later we were sitting on the sofa in the front room when the carpet started floating and we could hear bubbling noises from the corner of the room where the water was coming in,” she said. She got a few belongings together for Emily, 10, and Ted, 7, and decided to evacuate on the telephone advice of the emergency services.

“I got Ted on my back and stepped off my door step and quickly realised I was now in the river. It was pitch black, I had to struggle against the water to get him to safety and I was petrified,” she recalls. Luckily her husband Phil arrived at that moment to help rescue Emily, but the experience has left Rita with nightmares.

The government and the insurance industry have been in talks for months about whether or not flood cover will continue to be universally available for householders such as the Edges once the “statement of principles” the two parties had signed up to expires next year.

The statement means insurers agree to provide cover for flood-risk properties provided the government continues to invest in flood defences. However, the government made it clear some time ago that it will no longer sign off this deal once it runs out in June 2013, but up until a few weeks ago talks about an alternative solution seemed to have stalled. A failure to reach a solution would potentially leave 200,000 homes without affordable cover, leaving owners unable to sell their properties and potentially exposing them to financial hardship.

Now, both the government and insurers agree they are close to a conclusion. The government has ruled out the idea of subsidising all flood insurance, but has confirmed it is considering targeting funding at those most in need. If it adopts the ABI solution it would underwrite any losses that went beyond the central pool of money.

“Any targeting of government funding needs to be feasible, offer value for money and endure over the long term,” the Defra spokesperson said.

Advice and support for those in flood-prone areas is available via the National Flood Forum on 01743 741725 or 01299 403055.