As UK Floods Continue, ABI Urges Progress on Stalled Insurance Talks

November 26, 2012

The UK is currently experiencing a protracted series of floods, which have swept up the west coast of the country through Wales and into the Midlands. Two deaths have been reported, and over 800 homes and businesses have been flooded out. More rain is predicted – between 2 and 3 inches – for at least the next two days. Over 200 flood warnings have been issued.

The situation is complicated by the stalled negotiations between the UK government and the Association of British Insurers (ABI) over how to structure “a joint solution to ensure long term affordable flood insurance for high-risk households,” said the ABI.

The statement “follows the Government’s refusal to consider providing a temporary overdraft facility to a proposed not-for-profit special insurance fund for 200,000 high-risk households which will otherwise struggle to get affordable household insurance when the current arrangements come to an end next year,” the ABI continued. “The temporary overdraft facility would be used to pay claims if there were 2007-style floods in the early years of the scheme before it had built up its reserves.”

The ABI’s Director of General Insurance Nick Starling explained: “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 Government to try and find a way forward.

“The severe floods experienced by many areas of the UK this year are a reminder of the rising flood risk facing the UK. It is therefore vital that insurers and Government tackle this issue together – this is not just a problem for insurers. No country in the world has a free market for flood insurance with high levels of affordable cover without some form of Government involvement.”

The bulletin added that, “contrary to some media reports, the industry is not asking the Government for support funding of any kind.”

In a separate bulletin the ABI listed the following sectors that are for the most part covered by insurance policies:
— Household buildings and contents policies will cover flood and storm damage, including that caused by storm winds. If your home is uninhabitable, your insurer will usually pay for temporary accommodation while it is being repaired.
— Motor insurance covers damage to vehicles under comprehensive policies. Again, contact your insurer as soon as possible to get your claim moving. Some policies may provide you with a replacement vehicle if the damage is repairable.
— Business insurance policies will cover storm damage to premises and stock.
— Business interruption cover (which may be included or purchased separately) will cover additional costs, such as hiring temporary premises, if needed.

Aidan Kerr, The ABI’s Head of Property, commented: “Insurers understand how traumatic and disruptive flooding is and will be well geared up to deal with claims and help customers recover as quickly as possible. Unexpected events like these are why people take out insurance and customers should contact their insurer as soon as possible for help and assistance and to get claims moving quickly.”

Sources: Association of British Insurers and news reports

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