Insurance may rise £8 for every home in Plymouth for all to cover flood-risk homes
EVERY household in Plymouth faces having to pay £8 on their insurance to ensure homes at flood-risk can continue to get affordable cover under industry proposals.
The estimate emerged as the Association of British Insurers outlined details of plans to MPs at Westminster aimed at providing a future safety net for vulnerable properties.
But giving evidence to a parliamentary inquiry, the industry was accused of "trying to dump risk on the taxpayer" through the proposals being put forward.
The solution being put forward by insurers to provide affordable cover is to top-slice all insurance premiums to create a new funding pot to cover flooding claims – the so-called Flood Re model.
Otto Thoresen, director general, Association of British Insurers, told MPs on the Environment Select Committee that this would need an estimated levy on the low-risk properties of £8-£5 for building and £3 for contents insurance.
The MPs heard that this cross-subsidy arrangement already existed informally under the current insurance agreement – known as the Statement of Principles – which ends in June.
Mr Thoresen felt it would gain public backing given how unpredictable flooding had now become.
"I think broadly this would be supported," he said.
While the insurance fund is being built up, the industry want the Government to step in to provide a temporary overdraft to cover any shortfall if there were 2007-style floods in the early years of the scheme.
But the need for government support was challenged by Conservative MP George Eustice, who sits on the Environment Select Committee.
He said: "It seems to me you are trying to dump risk on the taxpayer."
The ABI has urged the Government to work with the industry in providing a long-term affordable solution, amid warnings homeowners could find it difficult to get mortgages or sell their properties.
Alluding to earlier frustrations with the process, Mr Thoresen said last year it was felt the talks were "no longer moving forward".
But since January the discussions had been 'constructive', although Mr Thoresen added: "It's two and a half years since this process started."
Without a solution being found, the ABI has already warned at least 200,000 households could have significant difficulties in getting flood cover, which may also cause problems for homeowners getting mortgages or selling their properties.
This has been underlined in evidence submitted to a parliamentary inquiry by the Council of Mortgage Lenders, which warned the lack of affordable insurance could undermine government moves to get more people on the property ladder and kick-start the housing market, and wider economy.