Commons committee told that industry was trying to reduce risk to ‘acceptable level’

Norwich Union chief executive Igal Mayer has defended the insurance industry in front of MPs who have accused it of trying to “backtrack” on offering cover to householders in flood-hit areas.

Giving evidence to the Commons environment select committee, Mayer said the industry simply wanted to reduce the risk to an “acceptable level” and was not backtracking.

But he told MPs he was “surprised” at the number of people who were not covered – about 25% of people hit by the floods had no cover – and said there was an “education issue” to be addressed.

The comments come as Baroness Young, chief executive of the Environment Agency, renewed her call for insurers to refuse cover for homes in flood plains.

Mayer’s comments follow the ABI’s robust response to allegations that insurers had been “disappointing” in their response to this summer’s floods, made by former Home Secretary David Blunkett in Insurance Times (Features, 29 November).

Mayer told the committee: “There’s a real education issue here. We have a product that’s largely very affordable. I find it surprising that many people are [not buying insurance].”

And in written evidence to the committee, the ABI said: “The floods have shown that there is scope and a need to promote insurance so that take-up is more extensive, and the exposure of the taxpayer is further reduced.”

It added: “We particularly find the under-insurance by some public authorities hard to understand.”

ABI director general Stephen Haddrill told MPs to heed the Environment Agency’s (EA) advice about building on flood plains.

He said: “Planning is a concern to us. Planning approvals are still being given to major developments on high risk sites.”

Hadrill said 13 approvals had been given to schemes against the advice of the EA last year alone.

“We think the government should get a bit tougher and make that a harder process.”

The insurance industry will oppose such developments in future and make clear the implications for insurance cover and premiums both for new and adjoining properties, the evidence read.

MPs called on Haddrill to put a price on flood defence spending. He refused, saying a figure would come after the review, but the £800m by 2010 pledged before the floods was not sufficient. He denied the industry was “scare-mongering” by warning that it might refuse cover to homeowners in high-risk areas unless more public investment were made in flood defences.