Standing up to the deluge

Nick Starling generally sleeps well at night. But ever since last summer’s floods, when he is lying in bed and rain is pouring down on the rooftop of his converted loft, he finds himself taking a few deep breaths.

It is not surprising that the ABI's director of general insurance would suffer some restless moments. It has been a year since the floods, and the Met Office has delivered a frustratingly ambiguous summer forecast.

A flash flood hit Oxfordshire earlier this month killing a teenage boy, and fears of a repeat of 2007 linger across the UK like the damp still clinging to the 700 or so homes that remain abandoned.

“We know there are going to be more and more weather events that are more and more severe. All the trends show that’s happening,” Starling says. “There are about 570,000 households that are thought to be at high risk and we need to understand where these households are, and what the government plans to do about them, because the vast majority are insured, even though they’re in high-risk areas.”

The total cost to the insurance industry is estimated to be £3bn, following 180,000 claims – 130,000 domestic, 30,000 commercial and 20,000 motor.

According to ABI figures released on Friday, steady progress has been made since the trade body’s last flood figures published in mid-December. Insurers have now paid out over £1bn, up from £750m. Over 60% of domestic claims have been settled in full and almost 90% of all claims have had interim or full payments made. And insurers have paid for around 17,000 households to be put up in alternative accommodation.

But what remains unsettled is where responsibility lays.

“The insurance industry has done its bit and more, and so what are the government’s plans to reduce risk in these areas?” Starling says. “Government spending is rising to £800m a year by 2010. But the point about last summer is that life changed, and it’s clear that much more is needed.”

In addition to increased government spending, Starling wants to see clear flood defence plans. He also wants the government to decide who is responsible for water, after last summer’s floods highlighted drainage issues. He adds that several local authorities still intend to build in high-risk areas.

While the ABI and government have been butting heads over flooding, the ABI did think it was on good terms with floods recovery minister John Healey. Until last month, when Healey accused insurers of not doing enough to rehouse flood victims, resulting in a public row.

Starling says: “Not a single one of our member companies wants to be seen as doing anything other than their absolute best. Then, lo and behold, ministers are urging us to pay claims quicker. It’s what our members have been doing already, so there’s no need to urge them. So we had to push back and say, ‘we’re doing our best, and by the way, we’re paying £3bn compared with what you’re doing’.”

He adds that the ABI has always said the recovery from the floods would take at least a year.

“Ministers are urging us to pay claims quicker. It is what our members have been doing already, so there is no need to urge them.

Nick Starling, ABI

Following the clash with Healey, the ABI hosted Chancellor Alistair Darling at its board meeting. The meeting was closed to the press, but the ABI indicated that it had addressed flood and taxation issues, and gone smoothly.

Yesterday, the ABI was scheduled to hold a flood review at the Queen Elizabeth II Conference Centre. Before Insurance Times went to press, the ABI said it intended to use the review to showcase the insurance industry’s achievements in handling the floods.

Starling says: “The big lesson our members learned was what sort of information they should provide for people, who can be in a state of shock. The loss adjuster arrives very quickly, and it’s not that difficult to make an assessment. But people are completely devastated and it’s important to provide them with basic information, such as what happens in a flood, why it takes so long, and what they can expect to happen.”

So far, ABI members have generally stuck to the trade body’s statement of principles, which dictates that existing policyholders with a flood risk of less than one in 75 will still be eligible for cover. If a policyholder is at greater risk, then insurers have agreed to continue cover where the government has planned to build flood defences in the next five years.

Starling says: “What we do know from last summer is that insurers were covering people way beyond the statement of principles. We haven’t seen massive signs of pulling back. Of course there are areas where insurers are saying premiums have to go up, and areas where they’re not writing new business. But in most areas it will be available, although it may be more expensive or have a big excess.”

If there were a repeat of last summer’s floods this year, then Starling believes the insurance industry would be resilient. But he warns that such a catastrophe could cause rates to skyrocket.

Starling visited the flood areas last summer and says he was struck by what he saw.

“The thing that hits you is, it’s street after street after street,” he says. “When you first get there, you don’t think anything out of the ordinary has happened. But then you realise that every single house has got a caravan outside and a site safe sign in the window.

“When we got to Hull, everyone was out doing their gardens. They said, ‘I can’t get into my house so I might as well get my garden looking nice’.”

Starling also spoke to an older woman who broke into tears and explained she and her husband had lived in their home for decades, and had been forced to move out.

When it comes to climate change, Starling believes in adaptation, not just mitigation. And he does not pretend to be an environmentalist. But if his background is any indication, he does have an interest in consumer protection.

After graduating from Cambridge and working as an academic archaeologist he travelled Europe and went behind the Iron Curtain. He then worked for the Department of Transport, where he held a range of policy posts primarily in aviation, highways and railways, and was private secretary to the minister for roads and traffic.

“What we do know from last summer is that insurers were covering people way beyond the statement of principles.

On the aviation side, he helped work on the EU’s liberalisation of the single market.

“I can always look back and think I helped with a huge democratic change by making aviation accessible to all, rather than a privileged few,” he says.

He also worked for the Health and Safety Executive, where he was board member and director of policy programmes, before joining the ABI in January 2005.

Of course, Starling is also involved in areas outside of flooding. Personal injury, pleural plaques, tax and anti-discrimination legislation are all high on his agenda.

“What goes on in personal injury is pretty scandalous,” he says. “For every pound that’s paid, lawyers get 43 pence. For quite small claims, sometimes the lawyer gets more than you do, which is not uncommon for a £5,000 claim. And the procedure is ridiculously slow. On average it takes about a year between a workplace injury and the compensation being paid and about two years for motor, even if it is a straight forward injury.”

He believes the delay in the government’s personal injury reform has been caused by the Ministry of Justice’s work on pleural plaques, and MPs lobbying to overturn the House of Lords’ decision that says insurers do not have to pay compensation for pleural plaque claims.

Starling believes the case over pleural plaques should be closed. He says: “The insurance industry has always gone by the fact that it’s for the courts to decide liability. That’s what the courts are there for, and we fix our premiums accordingly. So when a court comes along and says this is not actually a liability, then that should be adhered to.”

Meanwhile, he is busy pushing to ensure there is no taxation on foreign profits for UK multinationals, and is also adamant that any anti-discrimination legislation allows ABI members to continue with risk-based underwriting and impose age limits if they so choose.

All in all, Starling, 52, could suffer many sleepless nights if he let the stresses of his job get to him. But the husband and father of two, who sings in his church choir and considers himself the chef of his household, gets an obvious thrill from challenges, variety, and even – gasp – dealing with the media.

He says: “That is why the insurance industry is such a fantastic industry to work in, because it gets involved in every aspect of business and personal life.”