Troubled waters for house insurance

Chris Brooke5 April 2012
The Weekender

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Householders in flood risk areas could lose insurance cover or face massively increased premiums in the New Year.

A survey of insurance companies has confirmed the bleak outlook once a two-year deal to protect flood victims ends in December.

Insurers have warned that 'risk' areas which have not been protected by flood defence schemes will be hardest hit.

In these areas, thousands could lose cover as companies pull the plug on home-owners because flooding is regarded as 'certain' rather than 'possible'.

Even if they are able to renew policies, increases of more than 30 per cent are predicted in the cost of premiums.

Some insurers said they would increase premiums even in areas where flood defences have been built, according to the survey carried out for Radio 4's Money Box programme.

Widespread flooding in the autumn of 2000 left insurers with a £1billion bill.

In January 2001 they agreed not to exclude householders at risk of flooding for two years, so the Government could work on flood defences.

However, under this moratorium, premiums have still risen significantly. The promise of an extra £150million for flood defence schemes, announced in the Chancellor's spending review, has helped allay concerns.

However, unless the Government proves it can use this money quickly and wisely, the situation may worsen for those seeking insurance against floods.

According to the Environment Agency, five million people live in areas at risk of flooding in England and Wales.

Malcolm Tarling, from the Association of British Insurers, said premiums in these areas have already increased to 'reflect risk'.

He accepted there was a possibility some may lose cover.

'In these exceptional cases, flooding is almost inevitable rather than possible. Insurance was never designed to cover risks that are certainties,' he said.

Norwich Union, which covers one in five householders, has been telling them how to complain to their MPs and set up action groups on the issue.

In June, online insurance company esure said it would no longer offer cover for homes in flood plains or areas at risk of flooding.

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