by Brian Turner
Story link: AXA: Flood risk home insurance subsidised by £511 a year
According to latest data published by AXA, household insurance for homes in high flood risk regions is being subsidised by £511 each year.
This means that homeowners in affected regions are only paying 42% of the true cost of insurance to protect their homes against flooding.
The latest data was published as part of an AXA Parliamentary Flooding event in Westminster on 30th November focusing on the UK’s flood defence strategy and funding debate.
The insurance subsidy issue arises through the operation of ‘The Statement of Principles’ – an agreement which obliges existing insurers to provide cover as long as the government continues to invest in an adequate flood defence programme, leaving new insurers to come into the market and cherry-pick lower risk customers.
David Williams, managing director, claims, AXA Insurance, said: “Many householders do not realise that flood insurance is heavily subsidised and discounted due to distortion in the insurance market brought about by the Statement of Principles.
“The real concern for home owners is that the Statement of Principles will not be renewed when it expires in 2013 which could impact on the availability and affordability of insurance in high flood risk regions.
“It is incumbent on government, the insurance industry and other key stakeholders to find a new way forward to share risk, recognising that flooding is likely to increase in the UK as weather patterns become more unpredictable and extreme.”
Government strategy and spend on flood protection focuses primarily on coastal and river flooding and does not adequately reflect the impact of surface water flooding which is responsible for significant flood damage and disruption to homes and businesses.
Latest statistics from the recent Cornwall floods back up AXA’s earlier findings in that around two-thirds of flood claims were caused by issues associated with surface water.
AXA maintains that surface water risk must be recognised as part of a comprehensive approach to flood protection.
With ABI figures indicating that 5.2 million homes in England are at risk of flooding, AXA is calling for a tightening of the existing legislation including a legally binding target for reducing the numbers at risk of flood.
David Williams added: “We believe there needs to be better coordination between organisations that have a critical role to play in flood risk mitigation and protection; the Flood and Water Management Act of 2010 is a good start but we feel it could be strengthened in certain areas – like giving an independent body (most likely the Environment Agency) the responsibility for auditing local authority performance against flood risk management plans.
“The need for certainty from government can only become more urgent as many areas of the UK face imminent flood risk with the UK in the grip of an early harsh winter.”
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