So the 2015 General Election is over – although as I write this it’s still not completely clear just what is going to happen.
Once the dust has settled, it will then only be a few weeks before the new Flood Re agreement for affordable flood insurance is due to become law. This is meant to happen in July, but there have been reports in the last few days that a new government might delay the agreement or may even decide to carry out a complete review.
We have written many times over the last couple of years about Flood Re, which is designed to ensure that flood insurance for people in high-risk areas is not prohibitively expensive. It’s been a tortuous process so far and there have been so many hurdles and delays along the way. Even in the last few weeks there have been some last-minute issues: in particular we’ve seen lobbying from interested parties around some of the groups or properties which will be excluded from the scheme.
No agreement of this type will ever be perfect and not everyone will be happy with the final outcome – but this uncertainty needs to end. We wait with bated breath.
It was only two weeks ago that we wrote about Flood Re moving one step closer to becoming law, when its ‘secondary legislation’ was laid before Parliament. But it seems there are still some problems ahead.
A coalition of interested parties has now written to the government asking them to delay laying down the final regulations of the scheme, which is designed to provide affordable flood insurance. Their fear is that some homeowners will be facing ‘rocketing insurance premiums’, according to Post magazine.
Flood Re is meant to protect homeowners from high premiums, but in its current form it will not cover all private rented sector properties and some leasehold properties. This group, which includes the British Property Federation, Residential Landlords Association, Leasehold Knowledge Partnership and Association of Residential Managing Agents, has asked the government to withdraw the regulations until research is finished on how these excluded groups will be affected.
Of course, nothing much will happen in the next few weeks as we approach the election, but it’s still possible that the whole scheme will come crashing down before its current go-live date of July.
First the good news: it was reported a couple of days ago that Flood Re has been approved by the European Commission, which has ruled that it does not violate rules on state aid. And then the bombshell….
I woke up yesterday morning to hear a report on the BBC’s The Today Programme saying that the Committee on Climate Change (CCC), an independent government advisory body, has decided that Flood Re is ‘wasting householders’ money’ and that the cost of the scheme is three times greater than its benefits.
The CCC argues that the scheme is too generous, that the additional premium which will be added to everyone’s flood insurance policy should be lowered, and that money should be used to prevent flooding rather than helping people clear up once a flood has occurred.
The chair of the CCC sub-committee which has looked at Flood Re has been quoted on the BBC website as saying: “Managing flood risk will always be the best way of securing affordable insurance in the long term. A transition should be achieved by helping high-risk homes become more resilient. There is a risk that Flood Re will be counter-productive to the long-term management of flood risk in the UK, as it largely removes the financial incentive for households to take steps to avoid being flooded. As a consequence, the industry levy funding the scheme could spiral.”
We have said all along that there was a chance that the proposed start date for the Flood Re scheme for affordable flood insurance – July of this year – may not happen. This latest news does nothing to lessen our fear.
Business Secretary Vince Cable was in Somerset last week and among other things answered questions on flood protection and insurance. And one of the statements he made was that the Flood Re scheme to provide affordable insurance for properties at risk of flooding would definitely be ‘operational by the summer’.
This comes in the wake of the recent announcement that high-value properties will now be covered by the scheme, which is a major victory for campaigners. But there is still considerable concern about other types of properties excluded from Flood Re – in particular small businesses and leasehold properties.
The British Insurance Brokers Association (BIBA) published its 2015 manifesto last week, and this included a call for the government to work with insurers and brokers to find a solution to this. At the same time though it is trying to address the issue itself and is working with its members to find a solution outside of Flood Re for excluded properties.
Other industry bodies are still lobbying Parliament to get the Bill changed before it becomes law in July but admit it is very late in the day. Let’s hope that, one way or the other, the excluded groups will be able to find affordable flood insurance.
Yet more news on Flood Re, the agreement between government and insurers on flood insurance which is due to be introduced next year. And it seems that there is still widespread reservation about the proposals.
The latest response comes from the British Property Federation. According to the Financial Times, the Federation has warned that ‘millions will be exposed to “rocketing” premiums because several types of property will be excluded from the Flood Re scheme’.
At the moment, commercial premises and high-end private properties are excluded and, according to the FT, the government has taken this decision ‘partly on the grounds that there is limited evidence these groups have difficulty buying insurance on the open market’. But the Federation disputes this, saying policyholders from these groups are already seeing huge rises in premiums and excess levels.
Ministers are currently looking at the impact of Flood Re on excluded properties. But it seems that the Federation wants more certainty: a spokesperson says that this ‘suck-it-and-see’ attitude to affordable flood cover ‘is not ideal for either householders or people trying to run a small business.’
Flood Re is meant to be implemented by next summer. But there just seems to be a never-ending stream of problems and disagreements over whether it’s going to work.
And while this is going on, millions of people are still facing uncertainty over whether they will ever be able to take out affordable insurance cover against flooding.