The insurance industry has warned that many new homes could be left on the housing market and become uninsurable unless the government introduces new rigid planning controls for flood risk areas.
By the year 2020, a third of the 3 million proposed homes set to be built in Britain, could be on a flood plain according to the Association of British Insurers (ABI). If this is the case the ABI have warned their members that they may not be able to continue to offer flood cover as standard on home insurance policies.
The ABI’s assistant director, Justin Jacobs said, “The government’s ambitious housing plans are in jeopardy unless we reduce the flood risk. In the last year, thirteen major developments have been given the go-ahead despite Environment Agency advice on the flood risk”
Jacobs insists that insurers do want to continue to provide flood cover for homeowners, but warned that poor decisions on planning would create homes that would become too hard to sell, insure and live in, he said, “Where a local authority plans to ignore flood risk advice, the government should step in and review the proposals and be compelled to publish their decision.”
The government though, claim they have introduced the strongest planning rules ever to ensure that councils are properly managing the risk of flooding. They have done this by handing down power to the councils who will decide on whether to give planning permission for new housing developments, but only after consultation with the Environment Agency.
The cost of clearing up after the flooding in Yorkshire and Gloucestershire during the summer of 2007 was put at £3 billion, with the ABI claiming that its members had paid out up to £1 billion towards meeting the claims.
15,000 families were left in temporary accommodation with three quarters of them having to wait over 4 months before they could return to their homes.
Representatives from the ABI met with Members of Parliament to discuss its ‘Statement of Principles’, which included a pledge for the continuation of flood insurance to be offered to its existing policyholders who lived in an area where the risk of flood was being managed.
Director General of the ABI, Stephen Haddrill said, “The statement can only continue if the government commits to addressing the lessons learnt from the summer of 2007. That will require major new total investment from government and others.”
Homeowners who live on floodplains have been warned that they face a ‘hefty hike’ in home insurance premiums following the continued flooding which is being linked to climate change.
This advice came from Richard Mason of price comparison website Moneysupermarket.com, he said, “From the figures presented by Defra, the average cost of settling a claim for flooding has now jumped to between £70,000 and £200,000 per household. This amount is unsuitable for the insurance industry to bear in the long term unless insurance premiums rise.”
He went on to say that anyone looking to buy a property should check first with the Environment Agency’s flood map and consider the repercussions financially from buying property in a designated flood zone.
Phil Benson is an author of several articles pertaining to Home Insurance. He is known for his expertise on the subject and on other Business and Finance related articles.
