Monday, August 27, 2007

Left high and dry by an end to flood cover in the UK

The Scotsman: The insurance industry has delivered a stark warning to the government that unless it spends billions of pounds on flood defences over the next few years, consumers will be abandoned to the mercy of the winds and rain, unable to buy cover.

Without insurance protection, homes are unmortgageable, unsaleable and ultimately worthless. As the industry counts the £3bn cost of the latest downpours, thousands of households are likely to receive eye-watering renewal quotations, which serve as effective blight notices on their properties.

The Association of British Insurers has written to Environment Secretary Hilary Benn threatening to withdraw cover unless significantly more is spent preventing future trauma for families and heavy losses for companies.

It blames government mismanagement rather than climate change for much of the recent catastrophes and claims they could have been prevented with more investment in replacing antiquated drains and poor flood defences. It also blamed massive building on flood plains as a major culprit.

For the first time, the industry body made clear its intention to halt its losses by threatening to withdraw insurance from properties in high-risk areas unless the government spends £8bn on sea defences over the next 25 years; blocked drains and watercourses are adequately maintained; and all building on flood plains ceases until flood defences are installed…

…A bigger headache still will be new homes built on flood plains. The ABI gave a clear signal that the industry will not insure such homes unless adequate defences are put in place, which will leave them unmortgageable and worthless.

…In the light of January's storms and recent flooding, insurers will carefully scrutinise all applications for household insurance, with those at risk of flooding being charged a premium. Properties which have already been flooded could see big increases in their insurance costs.

…Before long, though, anyone who has experienced flooding will find cover unavailable at any price…

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