10 October 2007

THREAT TO FLOOD INSURANCE RISKS TWO TIER SOCIETY

Commenting on this morning's news that insurers may refuse to provide insurance cover for future flood damage, Debra Williams, Managing Director of Confused.com, the UK's leading insurance price comparison service said:

'The Government's failure to invest further in flood protection could perversely leave homeowners 'high and dry' without sufficient flooding cover from their existing insurer.

'We've already seen insurance companies reassess what they consider to be flood-prone areas by increasing premiums, however without significant investment from the Government, the insurance industry could potentially refuse to insure homeowners in high-risk areas.

'This in turn could force millions of households to either run the gauntlet of living without cover, or face the prospect of forking out huge additional premiums to specialist insurers willing to take on higher risks.

'While this is potentially desperate news for the owners of up to 2.2 million* properties currently residing in flood prone areas, the flip-side could be lower premiums for people living in 'dry' areas, as those insurers free from the burden of flood claims, reflect this in more competitive pricing.

'This raises the prospect of a two tier insurance society: those with affordable insurance in low-risk areas, compared to those with insufficient cover or cover at exorbitant levels. In line with the rest of the insurance industry, we hope the Government will backtrack on its position by investing more heavily in flood defences, thereby removing this potential scenario.'

To date, UK insurers, through the ABI, have been party to an agreement with the Government that means they will continue to offer insurance to those homes in areas at risk of frequent flooding as long as the government invests in bolstering and maintaining flood defences for these areas.

• * From a written Ministerial Statement by Elliot Morley, Minister of State for Climate Change and Environment: Association of British Insurers (ABI) revised Statement of Principles on flood insurance, Friday 11 November 2005
• This summer alone the UK motor and home insurance industry is estimated to have paid out £3 billion in flood-related claims, leading in many cases to premium rises for all.
• Confused.com is the UK's leading insurance price comparison service, allowing people to search and compare the best premiums for car, home and travel insurance.
• Confused.com provides real-time, fully-underwritten quotes in less than two minutes - this means the price you see is the price you pay, guaranteed.

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