Approvals to build on floodplains mean many homeowners could face premiums they cannot afford

Many of the one million homes in the UK to be built on floodplains by 2020 may be uninsurable against flooding, a leading actuary has warned.

Julian Lowe, chairman of the actuarial profession's general insurance flood risk working party, said approvals to build on floodplains meant many homeowners would face premiums they could not afford or difficulty in obtaining insurance.

Lowe told delegates at a convention: “Whilst the number of people at risk of flooding is likely to rise simply due to climatic changes, this will be exacerbated by increasing numbers of people living on floodplains. Ten per cent of all properties in England are located on floodplains and more than a million new homes are due to be built on floodplains by 2020,” he said. There will potentially be many new homes in England for which insurers are not prepared to provide cover.”

Insurers, local authorities and the wider community also needed to improve their approach and response to floods to better protect themselves, he said.

Lowe also highlighted aspects of the ABI's stance on insuring new homes in flood risk areas which are in urgent need of clarification, as well as suggesting improvements to how insurers determine ‘at risk’ properties, better information on flood risk for insurers and homeowners, more information on drying out properties for homeowners and a more cooperative approach to collecting and sharing flood risk information from insurers.

Although there may be problems in 2009 for new properties to obtain insurance in high flood risk areas, the convention heard that this was certainly not the case for existing properties. A survey of household insurance premiums by the Working Party showed that it’s still possible to obtain cheap insurance in nearly all high risk flood areas in the UK.

Lowe said: “Whilst insurers may complain about the lack of government spending on flood defences, most insurers still offer very cheap insurance in many high risk areas. As long as most insurers offer household insurance at far less than the economic cost in high risk flood areas, there will be very little incentive for government or homeowners to invest in flood defences.”