The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
I am today publishing a report following the three flood insurance working groups established in 2010. The working groups were made up of representatives from Government, the insurance industry and community groups. Building on their conclusions, the Economic Secretary to the Treasury and I have agreed to sponsor further work to analyse the options for managing the future financial risks of flooding.
Government and the insurance industry remain committed to making sure flood insurance remains widely available. Together we are working towards an announcement in the spring of a new shared understanding which sets out more clearly what customers can expect from their insurer, and from Government.
The existing statement of principles currently enables insurers to price according to risk. Risk-based pricing has not been commonly applied in the past because of a range of factors including commercial decisions by individual insurers and historic limitations in the availability of flood risk information. However, the market is evolving with the development of more sophisticated tools for assessing a customer’s flood risk with the reality being a continuing trend towards more risk-based pricing.
Taking steps to reduce flood risk, whether by Government, local communities or individuals, minimises damage occurring in the first place and thereby plays a vital role in bearing down on insurance costs. In accordance with this Government’s determination to deliver solutions which offer taxpayers greatest value for money and which will endure over the long-term, the priority will continue to be to invest in reducing the risk of people and properties being flooded in the first place, rather than re-directing funds into subsidising insurance premiums, which would do nothing to protect against the wider, non-monetary, health and well-being impacts of flooding.
Hence we propose to:
Continue to target Government funding towards those most at risk and living in the most deprived areas through flood and coastal resilience partnership funding launched in May of this year. There is already progress: 36% of households protected by new flood alleviation schemes proposed for 2012-13 are at significant risk and in the most deprived communities, compared with 6% during the previous spending period. Overall, the Government plan to invest £2.17 billion on flood and coastal erosion risk management in England over the current spending review period.
Continue to improve the quality and availability of flood risk maps published by the Environment Agency including surface water flooding maps, so that individuals and communities can be more aware of levels of local flood risk and better informed about what action could be taken at an appropriate level to provide better protection.
Continue to extend the flood warnings service so that by 2015 at least two thirds of households and businesses in the highest risk areas are signed up to receive the floodline warnings direct service.
Explore with the insurance industry how to create an environment where those at risk are incentivised and supported to proactively reduce flood risk with the consequent effect being seen in their long-term insurance costs.
Over the next few months we will continue to work with insurance companies to consider what additional measures might help safeguard the affordability of flood insurance for households. As part of this ongoing work we will be considering the feasibility, value for money and deliverability of targeting funds to help those most in need, building on the analysis undertaken by the working groups established after last year’s flood summit. This may include models where communities might work together to secure affordable insurance.
These options will be considered over the winter months in order to make further announcements in the spring. However, in the interests of keeping the Members and their constituents abreast of these ongoing discussions I wanted to give this interim update.
Copies of the report of the flood insurance working groups are available on the DEFRA website.