Fears for flood insurance to be priced out of reach

THOUSANDS more people will not be able to afford flood insurance if a solution is not reached quickly, Morpeth campaigners have warned.

The Statement of Principles to ensure people in flood-risk areas could still secure cover is due to end in June next year.

Talks have been on-going for many months between the Government and Association of British Insurers (ABI) about a new system, but an agreement has yet to be reached and the industry body has described the current situation as being at an impasse.

A Morpeth flood insurance working group was established by Morpeth Town Council, the Morpeth Flood Action Group (MFAG) and the Morpeth Chamber of Trade following reports of rising premiums and excesses on policies after the 2008 flood.

Its model for all policyholders to contribute to a community flood levy has attracted national praise.

Coun David Parker, lead town council member of the group, has written to Secretary of State for Environment, Food and Rural Affairs, Owen Paterson, to ensure that a new mechanism is in place before the Statement of Principles runs out.

“The Government has been saying for about a year that it’s getting nearer and nearer to a solution, so we’re very concerned about the ABI’s statement,” he said.

“I saw Mr Paterson being interviewed on BBC television and his comments were less helpful in the circumstances. Thousands of people are facing no insurance or unaffordable insurance and they need some reassurance that there will be something in place to help them.

“The Morpeth model is not a million miles from the ABI proposal and it looked like the two parties would proceed with a form of cross subsidy, so it was quite disappointing to find out that no progress is being made, particularly at a time when many parts of the country are suffering from flooding.

“This issue affects the whole town because who would want to live in a place where some areas are empty because people cannot get insurance. This is the reason why we feel it’s appropriate to ask all policyholders to contribute to a community levy.”

The ABI says that although it is not asking for support funding, the Government has refused to provide a temporary overdraft facility that would be used to pay claims if there were heavy floods in the early years of the new scheme before it had built up its reserves.

MFAG Chairman Alan Bell said at the moment, about 75,000 people pay more than £500 each year for the flood part of their insurance bill, but if a solution is not found this number will rise to 650,000.

“Time is pressing because an agreement is needed by the end of December otherwise the insurance industry would not be able to get the new system in place by the end of June,” he added.

“Another problem is that companies are not insuring homes even if they are not at risk of flooding, including in Morpeth, because they are using post codes to determine whether or not they give a quote.

“We will be lobbying MPs, Defra and the Treasury in the next few days.”

Nick Starling, director of general insurance at the ABI, stated that no country in the world has a free market for flood insurance with high levels of affordable cover without some form of Government involvement.

He said: “The Government has indicated it will not provide any temporary overdraft facility for the insurance industry’s not-for-profit scheme, which makes it very difficult for it to go ahead.

“As a result negotiations have hit an impasse. Insurers know their customers are increasingly worried about flood cover and we will therefore continue talks with the Government to try and find a way forward.”

A Defra spokeswoman said: “We’re disappointed that the ABI has chosen to make this statement while we are working to keep people safe from the impact of flooding.

“We remain committed to working with the ABI and others about what replaces the Statement of Principles agreement and a range of options are on the table.”

Hundreds of properties across the UK were flooded this week after they were hit by persistent heavy rain.

The Environment Agency issued a flood alert for the River Wansbeck late on Monday night, with particular concern over the level of the River Font – a tributary which joins the Wansbeck at Mitford.

The promenade in High Stanners was closed because of the height of the water, but the drier conditions on Tuesday allowed the river levels to recede.

A flood alert was issued for the River Pont on Sunday, however no warnings were given.