It is thought that those who live in areas that suffer from high winds or flooding, there is a good chance that they will be paying more for their home insurance in 2008. Due to re-occurring floods, in some parts of the UK, it has resulted in claims running into the billions; therefore many insurers have already announced that the premiums will begin to increase as a consequence. For the moment, those premiums are set to rise all over Britain, but they could change.
The insurance industry have released a current report, which claims that 61% believe that price competition will force the industry to end its current practice of subsidising those in flood prone areas, by charging higher premiums to everyone. That means a reduction in premiums for those who live in areas with average risk may not be likely.
The insurance industry has criticised the Government stating that they have let millions of homeowners and businesses down, as they failed to commit enough resources to flood improvements and defences.
This has increased flood worries as homeowners living in areas with high risk flooding may be unable to insure their homes in the future if the Government all together stops investing in flood defences. Concerns were raised when the Environment Agency’s budget for maintaining flood defences were cut by nearly £15million this year. The insurance industry is therefore threatening to withdraw cover from the two million homes in high-risk areas, if spending on preventative measures is not increased.
The current budget for flood defence is £540 million per year, but this should be increased to nearly £750million the Association of British Insurers (ABI) believes. A spokesperson from ABI claimed: “If we get a situation where vastly more properties are vulnerable to flooding, at the very least they’ll become more expensive to insure, at worst cover for flood risk as a standard part of household policies will come under pressure.”