Insurers 'playing hardball' over flood coverage

The UK's coalition government is facing growing pressure to explain how it will protect flood-prone properties after cutting the budget for defences, the Financial Times reports.

At the same time, the Government is also trying to forge an agreement with a reluctant insurance industry to ensure protection for high risk homes.

The FT said insurers, represented by the Association of British Insurers (ABI), are determined to end an existing agreement under which they will provide flood coverage as standard in home insurance policies if the government boosts investment in flood policies. The agreement is due to end in 2013, and the ABI said no follow-on deal was intended.

“The ABI is obviously playing hardball,” the FT quoted Anne McIntosh MP, chair of parliament’s environment select committee, as saying. “I can understand their frustration – the last government promised to get spending up to £1bn a year by 2012, but we have found out that it was money they didn’t have.”

However, the paper also reports that the insurance industry faces criticism that it has not kept its part of the bargain either, pointing to evidence suggesting that people suffering flood losses often have to pay higher premiums. A survey from the National Flood Forum found that excess costs for flood victims often rise by about £5,000.