Will Flood Defences Keep Homeowners Dry?

The weather and the risk of flooding are never far from the headlines these days. Concern about the effects of climate change is being discussed by the government, environmental groups and insurers.

For around 2.5 million householders in the UK the threat of flooding is very real, as major rivers and the sea become increasingly likely to inundate low-lying land, coastlands and estuaries. In recent years insurers have paid extensive claims for disasters such as Hull, Tewkesbury, Cockermouth and Carlisle. But claims have come from other places where there is no history of flooding, but where heavy rain has caused flash floods that have devastated properties.

The AA believes the government should continue to maintain spending on flood defences especially in vulnerable parts of Britain. It has warned Caroline Spelman, Secretary of State for the Department of Environment, Food and Rural Affairs, that any spending cuts could make hundreds of thousands of homes uninsurable, and thus un-mortgageable, and result in insurance premium rises for everyone.

Simon Douglas, director of AA Insurance said: "Millions of people are at risk of inundation from overflowing rivers and estuaries during extremes of weather, and that risk is increasing all the time, and the government has recently restated its commitment to ensuring vulnerable parts or Britain are protected.

"But many leading commentators in the insurance industry are concerned that spending on flood defences, and supporting local authorities to help reduce the risk of flash flooding, should be significantly increased."

Simon points out that the so-called 'Statement of Principles', which is an agreement between the Association of British Insurers and the government, and guarantees that those living in flood-prone areas can continue to maintain insurance cover for their homes, expires in 2013.

He adds: "It's important that the insurance industry and the government work together to ensure that such people can continue to enjoy the protection they deserve, and we will be doing our part to help that process.

"Historically, both home buildings and contents insurance premiums have remained relatively static, according to the AA's benchmark British Insurance Premium Index,* but are showing signs of upward movement. The cost of buildings insurance has on average risen by about 13% over the past year while the cost of contents cover has risen by only 6% over the same period.

"Insurers are concerned about future flood and storm damage claims, which are likely to become more frequent and more severe as the climate warms, and they will need to increase reserves to be able to pay out for large numbers of future claims.

"If investment in defences – and that includes ensuring storm drains are kept clear and are improved to remove surface water – is not maintained, insurers will become increasingly fussy about who they insure and premiums will inevitably increase."

* AA British Insurance Premium Index, July 2010

Home buildings insurance (market average premiums)
July 2010 £209; April £204 (up 2.5% over quarter)
July 2009 £185 (up 13% over year)

Home contents insurance (market average premiums)
July 2010 £111; April £109 (up 1.4% over quarter)
July 2009 £105 (up 6% over year)