We must safeguard the most vulnerable against the effects of flooding

We need to act now to make affordable flood insurance available for households at high risk of flooding, says Katharine Knox.

Lately we have seen worrying media reports that talks are breaking down on the future of flood insurance between Government and the insurance industry. The National Flood Forum reports that at least 816 homes have been flooded in the past week, with some areas facing repeated flooding. This raises concerns about how vulnerable households will be treated in future by insurance companies.

JRF is concerned that extreme events like flooding will increase due to climate change. We need to take action now to ensure that affordable flood insurance is available for households at high risk of flooding. Otherwise we risk houses becoming unsaleable and unmortgageable which could have devastating social consequences. It is highly likely that people with the least choice will end up living in these areas. We do not want to see a situation where households that are unfortunate enough to face the greatest risk of severe impacts from flooding also lack appropriate safety nets.

According to the Telegraph, the Government has rejected the only ‘workable’ solution to the problem of providing affordable insurance to potential flood victims.

The Association for British Insurers (ABI) explain their proposal is to provide insurance from a not-for-profit special insurance fund for 200,000 high-risk households that will otherwise struggle to get affordable household insurance when the current arrangements come to an end next year. There would be a levy to support this on the insurance industry. This would effectively reaffirm the current practice of cross subsidy between low- and high-risk households.

The breakdown in talks follows the Government’s refusal to consider providing a temporary overdraft facility to the proposed not-for-profit fund for high-risk households. This facility would be used to pay claims if there were extreme floods in the early years of the scheme (such as in 2007) before it had built up its reserves. The ABI stress this is not the same as asking the Government for direct national funding to support flood protection.

Future arrangements need to be put in place to ensure that flood insurance remains available and affordable to all households at high risk, especially those who are on low incomes. The National Flood Forum and ABI say that already many insurance companies are making plans that assume there will be no agreement. The worry is that leaving arrangements to the free market will effectively price these high-risk households out of cover.

JRF research has highlighted links between social vulnerability to river and coastal flooding and poverty and deprivation. Pluvial (surface water) flooding, though harder to foresee, also puts deprived households slightly more at risk than less deprived households.

Researchers John O’Neill and Martin O’Neill have set out clear arguments about the limitations to a market-based approach, which would leave some households unable to access affordable insurance.

We need an affordable, collective response to this problem, not one that leaves those who are most vulnerable to bear the costs and consequences of a failure to develop an effective national response.