Flood Insurance – Who should Pay?

Insurance is, as Orwell called it, a swindle, but at least it is a logical swindle. Insurance rates are calculated on the industry’s view of statistics; the uplift and margin applied to those statistics are the tools of the swindle, but the fundamental premium you pay depends on the figures. If you wish to insure your life you age and the statistical analysis of your longevity will be relevant and if you want to insure your home against losses suffered by flooding then the likelihood of flooding in the place where your home is situate is part of the figuring which sets the price that you pay. If the insurance company, when looking at the statistics tells you that it will not insure your home at any price, then you know that flooding is not merely possible but highly probable.

Whether you agree with George Orwell, you will almost certainly want to insure your home and its contents. Swindle or not, the risk that you will suffer damage may be very remote but the consequences will be very profound. That is why if you have borrowed yo buy your home the bank or building society will insist that you have a certain standard of insurance and if you are in the lucky position of being loan free you yourself will also want to keep it insured.

Risks of homes being damaged by flooding have increased tremendously in the past fifty years. There are two reasons; the first is that the pressure on housing has caused builders to build where they can, as opposed to where homes should be built. Many homes are being built on flood plains of rivers, so named because that is land created by a river flooding, and many homes are built far closer to rivers and the sea than our ancestors would have ever built them.

The second reason revolves around climate change. Incidents of flooding are increasing and floods are getting more serious than they used to be. Climate changes messes with our weather and weather events, like flooding are becoming more prolonged and more serious.

The flooding that is becoming more prevalent and affecting homes in places where homes ought not to be built is not a very new problem. For the past three years there has been a safety net in place which insures homes which would otherwise be uninsurable for flood risks. This safety net is operated under the auspices of the Local Government Association, which would otherwise pick up the flooding bill, but it will expire soon, and the Local Government association is looking for some alternative insurance scheme. It wants the insurance industry to commit to providing insurance at low prices for these impossible to insure areas.

Understandably, the insurers do not want to take on risks that are too risky; the only way that it can do this is to add to the costs of those who buy insurance for homes that are in places where there is or a very remote risk of flooding. If you live in some parts of Nottingham, Kent, Huddersfield, Devon, Cockermouth, or Worcester you will not be able to buy flood insurance at any price.

The Local Government Association argue that insurers should not be able to cherry pick where risks are low; I do not understand the moral imperative that requires insurers to insure against risks that will almost certainly happen and are caused by actions that they did not create. If you bought your home having made proper enquiries about flooding in a place where there is no flood risk then what is the reason that makes you pay more for your insurance than you should because some have bought homes in places where there are large flood risks, often as a result of Local Authorities having given planning permission to build homes in flood plains.

 

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