MP criticises insurer for reducing flood payout because of tax relief

An MP has said he was “shocked” by the practices of New India Assurance after it deducted £2,466 from a claim paid to a business affected by December’s floods because it had received government tax relief.

In February David Cameron announced that all businesses affected by the winter’s floods would be exempt from paying business rates for three months. The Prime Minister said the measure was designed to “help and protect communities who need protecting.”

But in a commons debate last week, Liberal Democrat MP Duncan Hames told Defra minister Dan Rogerson he was “shocked” to learn that a restaurant in his constituency, Fat Fowl, had had the tax relief knocked off its business interruption claim by New India.

He called on the floods minister to stop insurers from reducing their claims because of the government assistance in the future.

Hames said: “Clearly, it is not the government’s intention that business rate relief should be something to appease the insurance industry, so will he use his relationship with the industry to ensure that this practice ends?”

In response, Rogerson said that he would raise the issue during his regular round table meetings with insurers.

Arlene Caddow, the owner of Bradford-on-Avon based Fat Fowl, told Insurance Times: “I insured myself for business interruption. This is an incentive the government has given us on top. It is for our benefit, not for insurers.”

New India said it had made the deduction from Caddow’s £68,000 payout because it was “not a financial loss” that her business had incurred. It also defended its action as standard industry practice.

A spokeswoman said: “The government allowed a three-month tax relief to Ms. Caddow which means that this amount was not a ‘standing charge’ incurred by her during the business interruption period.  Hence this amount had to be deducted from the list of costs she incurred. 

“Had the government not allowed this relief, this would have been part of her ‘standing charges’ and would have been indemnifiable under the policy. This is standard practice in insurance.

“Our position on three months’ rate relief in the computation of the claim amount is reasonable and correct.”

However the insurer added that it has now decided to review its decision.

“We are mindful of the difficult conditions our client is facing and have decided to review our decision on this part of the claim,” the spokeswoman said.