Scots hit by storms this winter could be left with homes they can’t insure or sell because of fundamental flaws in a government scheme aimed at helping flood-risk households.
As parts of Scotland brace for more stormy weather this weekend, there is growing opposition to a UK government bill that includes a deal aimed at helping flood-hit households.
But while the Water Bill is expected to be approved when it goes before the House of Lords early in 2014, experts warned that many homes will be left at risk by the deal.
The scheme is designed to replace the “statement of principles”, a long-standing agreement between insurers and Westminster whereby the former guaranteed affordable cover for flood-risk homes provided the latter invested in flood defences. The agreement expired in the summer and is set to be replaced by Flood Re, a deal that will add £10.50 a year to all home insurance premiums. The levy will start in 2015 and is expected to raise £180 million a year to pay for capped premiums for at-risk properties.
Some 5,000 homes in Scotland would struggle to afford home insurance in the absence of agreements such as the statement of principles, the Association of British Insurers (ABI) estimates.
Homeowners without insurance are also unlikely to secure mortgage finance, while the high cost of cover is a major deterrent to potential buyers.
One in 22 homes and one in 14 businesses north of the Border is at risk of flooding, according to a detailed study by the Scottish Environmental Protection Agency (Sepa).
But many will not be helped by the agreement set out in the Water Bill, experts warn.
“It’s not just coastal flooding that affects homes – the increasingly unpredictable weather is as likely to lead to water run-off flooding in places with no history of flooding as well as those who live on flood plains,” said Ian Crowder, spokesman for AA Insurance.
“The question is: will Flood Re protect all those who might be affected by floods? The short answer, is ‘no’.”
The costs facing homeowners hit by flood and storm damage can be crippling. Insurers paid out £1.19 billion to flood-damaged homes and businesses last year, at an average of £18,200 per claim, ABI figures show.
While the statement of principles provided almost universal protection, however, the proposed replacement has exclusions that mean around half of homes at significant risk of flooding will no longer be covered.
Among the properties that could miss out are farms, homes that are “not occupied by the policyholder” (such as buy-to-let properties), those in council tax band H, businesses (potentially including B&Bs) and houses built after 2009 (including those built on floodplains).
Around 970,000 homes will, by 2020, be considered at risk of flooding, according to the UK government’s Climate Change Impact Assessment. However this isn’t accounted for in Flood Re, an omission that amounts to playing “Russian roulette with people’s homes”, Friends of the Earth has claimed.
“The Flood Re provisions allow for the number of homes protected to be set by the environment secretary and that is likely to be around 500,000,” said Crowder. “One paradox is that those homes at some but low risk of flood (it looks as if this will be better than one in 200 year risk) may be excluded as well – and, as a result, homes at higher risk could pay less for their insurance than one at much lower risk.”
Lenders have also expressed concerns over the proposals. The Council of Mortgage Lenders recently called for more details about Flood Re and urged the government to ensure that all homes are covered, including those owned by private and buy-to-let landlords.
l For more information – The Scottish Environmental Protection Agency recently updated its “flood extent maps”. Go to Sepa.org.uk to find out if your home is considered at risk of flooding.