Homeowners in flood risk areas face substantial rises in their premiums when changes to insurance come into play next year.
Homeowners in flood risk areas face substantial rises in their premiums when changes to insurance come into play next year.
The current regime as set out in the Flood Insurance Statement of Principle - which ensures that flood insurance is available for most homes, even those lying in an area of significant flood risk -is to be withdrawn from June 2013 when the current agreement ends.Insurers will no longer be obliged to offer flood cover to those whose homes are at risk of flooding.
It comes as Britain struggles to cope with a washout summer which so far has been marked by torrential rain and heavy flooding.Flood alerts have been common across the country and July was the wettest in 100 years. Additionally, the ground is saturated after months of rain and prone to surface flooding because local drainage systems cannot cope with the amount of rainfall. Many home owners are already dealing with substantial flood damage.
Claire Winson, associate in Strutt & Parker's
"However, from June 2013, the current regime of insurance as set out in a Statement of Principles is to be withdrawn. This statement was agreed between the government and the Association of British Insurers (ABI) and ensured that flood insurance was available for most homes, even properties lying in an area of significant flood risk.
"Due to the lack of investment into flood prevention schemes by successive governments, the ABI will not renew this agreement and insurers, property owners, occupiers and lenders must be aware that the regime will be changing.
"Without government intervention, it is likely that insurance will be priced purely on risk and driven by competition. As aresult, those who need cover the most could struggle to find affordable insurance and be left with a home they can neither insure nor sell. Likewise, where flood insurance is not available or is prohibitively expensive, a property owner could find themselves in breach of their mortgage. Additionally, this will have a negative impact on the property market."
Mrs Winson added that environment and rural affairs secretary Caroline Spelman said the government was still in discussions with the ABI but confirmed that 'risk-based insurance pricing' provided an incentive for households, businesses and communities to reducetheir flood risk.
Mrs Winson said: "This would suggest homeowners will face some very high premiums next year. However, it was also said that risk-reflective insurance pricing needed to be introduced gradually, allowing markets to adjust steadily while supporting those unable to bear the true cost of flood risk to their homes,which may at least help a little.
"What happens over the forthcoming 12 months is still uncertain but it is obviously important for all parties with an interest in property to be mindful of these issues."
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