Flood insurance premiums could skyrocket after July 31st
Time running out for Government and Insurers to reach a new agreement on flood insurance premiums
People at risk of flooding could be set for a significant increase in their flood insurance premiums if talks between the government and the Association of British Insurers (ABI) are unsuccessful.
Currently, the most at-risk properties are protected by the Statement of Principles for Flood Insurance, which requires insurers to cover homes and business in high-risk areas, on the condition that the government takes action to curb the threat of flooding, such as by bolstering defences and enhancing local infrastructure.
However, this statement is set to come to an end on July 31st, after which flood insurers will be free to set whatever premium they like, pricing many consumers out of the market and leaving them uninsured.
The only way this can be avoided is by the ABI and government coming to an agreement on how to replace the Statement of Principles, which was only intended to be a stopgap for the industry when it was introduced in 2000 and has already been extended, after initially being set to expire on June 30th this year.
With the deadline approaching, insurers agreed to postpone it by one month to enable the ABI and government to come to an agreement on the best way forward, but talks remain ongoing and, as yet, neither party has revealed how close they are to agreeing on a unified approach.
The ABI has proposed the introduction of a fund known as Flood Re, which would see affordable flood insurance made available to those at high flood risk, with premiums set at an agreed amount that would then be paid for by a small levy on insurers.
Though it is likely that this levy would then be passed on to consumers through their insurance premiums, it would still be less costly than the alternative of an open market where insurers are free to set their own premiums.
The ABI has stated that it is “100% committed” to agreeing a deal with the government, but has yet to confirm any concrete details or set out a timetable, aside from to say that any new arrangement would undergo a transitionary period to allow consumers and the industry to become familiarised with the new process.
“In other countries flood insurance is only widely available to those at high flood risk with some form of government support. We are working hard with the government to try to reach a deal to safeguard flood insurance,” the industry body stated.
The government, meanwhile, is also confident of a resolution, with environment minister Richard Benyon recently stating that “significant progress” has been made in discussions with the ABI on how its FloodRe proposal could be implemented.
“This is a complex issue and no deal has been reached, but we aim to conclude negotiations as soon as possible,” he added.
Though talks appear to be progressing, time is running out for consumers, particularly those in high-risk areas whose protection is coming to an end on July 31st, unless a resolution is made.