Insurers criticise the reforms and call for cap to be removed from the proposals

Insurers have hit out at proposed government reforms of the Riot Damages Act, saying that compensation would be slashed by as much as 90% under the changes.

The ABI has calculated that for every £10 paid out for the August 2011 riots, only £1 would have been paid under the proposed new rules.

ABI director of policy and deputy director general Huw Evans said the proposals are “at odds” with the government’s stated intentions.

“The review of the Riot Damages Act is overdue, but government proposals to drastically cut back compensation are at odds with its intention to retain the principle that the state is responsible for the costs of riot damage that has proved its worth for taxpayers for more than 100 years,” he said. “Not only does the Act provide important protection for the uninsured, it means insurers can cover riot damage in England and Wales as a standard part of property insurance.

“Both would be in jeopardy under the government’s new proposals, which instead need to reflect today’s world and the needs of modern businesses. Insurers want to continue to offer riot cover as a standard part of property insurance, but such drastic change could significantly impact on premiums, lead to the incorporation of excesses for riot into business insurance policies, or the exclusion of riot from insurance cover in certain areas.”

Under the proposals, only businesses with an annual turnover of less than £2m will be able to make a claim, but the ABI said that only 9% of businesses affected by the 2011 riots were in this bracket. This will mean that the police, from which insurers can reclaim damages paid out for riot claims, will no longer be responsbile for damage to businesses with a turnover in excess of the £2m cap.

Biba executive director Graeme Trudgill said that the police should ultimately be responsible for maintaining the peace for all businesses, regardless of size.

“We believe the aim of the Act is that those that have suffered losses can receive compensation to enable them to be put back into a similar position than before the claim occurred,” Trudgill said. “We cannot see a case for discriminating against different businesses just because of a blunt instrument like the size of their turnover. The responsibility on the police to keep the peace remains the same and the need for compensation is no less.”

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