The get-tough approach from insurers comes amid a stark warning by the industry's trade body that unless the government stumps up more money for flood defences, household premiums will have to rise and, in some cases, cover will be withdrawn. In his pre-budget statement, Alistair Darling promised to spend £650m on flood defences in 2008-09, provoking an angry response by the insurance industry, which said it needs at least £800m. But there's evidence that insurers are already jacking up premiums.
…Until now, an agreement between the Association of British Insurers and the government has required insurers to continue to offer cover to existing policyholders in flood risk areas in return for a government pledge on flood defences. Large numbers of homeowners, in and around those areas affected by this summer's flooding, are relying on this agreement - without insurance, many of their homes would become unsaleable overnight.
AA Insurance said this week that, over the last three months, home insurance costs have risen at their fastest rate since 1994 - directly as a result of the flooding. Buildings premiums rose by 3% in the past quarter, reflecting the estimated £3bn cost of flood damage, it said….