Subsidy needed for flood-risk homes

floodingInsurers are demanding government subsidies for flood risk homes to avoid homeowners finding themselves uninsurable.

The Association of British Insurers has called on government to "seriously consider" subsidised flood insurance for policyholders in high-risk areas. This would replace a voluntary agreement to insure those homes that runs out in 2013.

Years of neglect

The demands come after years of calling for more action by central and local government to build better flood defences and improve drainage. These calls have repeatedly fallen on deaf years.

The Department of Environment Food and Rural Affair has simply said it will continue to improve the quality of flood risk maps, extend flood warning services and target funding towards at-risk areas.

Voluntary cover

The ABI spoke of its frustration at government's lack of action, urging it to think about flood risk management. It agreed a voluntary code that means insurers have to continue to insure at-risk properties until 2013, to give the Environment Agency and others time to reduce the food risks.

That voluntary system means high-risk homes are being subsidised by low-risk homeowners who pay more for their insurance than they need to. Insurers say that is not fair and the system must end. And too right it should.

But Insurers warn that, without the flood defence and drainage improvements, some homes will see their policies soar. Many will be uninsurable.

Can't pay, won't pay?

My back-of-a-fag-packet calculation is that the cost of the subsidy will be about the same as the cost of better food defences and, as the government clearly has no intention of paying it, it will call the insurers' bluff. And the insurers will probably cave in.

That would be a shame. At present those of us living in low food risk areas are paying too much to subsides those who live in flood plains and flash flood towns with insufficient drainage.

A government committed to a free market would actively encourage insurers to price flood risk homes accurately and refuse to insure the worst risk properties. The value of those homes would plummet as mortgage companies refused to fund them and people would stop building homes in risky areas.

If people wanted to stay in their homes they'd lobby for better flood defences.

Pull the plug

I'd like to see the insurers pull the plug on subsidised flood insurance for river dwellers. But I would say that. I live on a hill.
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