Water torture

Drip, drip, drip – an insurance journalist was telling me about their problems with household cover last night.

The steady stream of negative comments in my ear wasn’t quite water torture, but uncomfortable nonetheless. Their household insurers had declined to renew cover because they were living in a coastal area that was potentially prone to storm surge as a result of climate change. They told me that they’d never had a claim for flooding, so why was their insurer being so unfair?

I fear this may be just the tip of the iceberg (if I am to continue using watery figures of speech). Many people affected by this summer’s flooding, which cost the industry £3 billion, will be wondering just what their premiums might be as cover becomes scarce or even non-existent for their area.

The concept of fortuity is an indispensable element of insurance. If flooding is becoming more frequent because of climate change and poor flood defence management, then what insurer will want to pick up the tab for that certainty? The insurance industry is not a charity. Insurers are commercial entities – they want to make money, just like any other business. They should be allowed to make commercial decisions about what is best for their business.

Sadly, the public doesn’t always see it that way; a sad reflection of the lack of understanding that many have about insurance and the way it works.

Insurers have told the government that it has failed to play its part on flood defence spending. Their message doesn’t appear to have got through yet. I fear that insurers will have to toughen their stance if the government is finally going to sit up and take notice of what the insurance industry has been saying about flooding for some years now.

Anecdotal evidence reaching me suggests that some insurers have already taken this decision to strengthen their resolve with regards to flood risk, but haven’t yet signalled this to the customer or to their distribution channels. It’s understandable as such a move doesn’t make for universal popularity.

Providing cover for flooding is a partnership between the industry and government. If the government doesn’t want to play ball then surely that partnership must fail and something will snap. Widespread withdrawal of flood cover is something that the insurance industry wants to avoid, but if greater determination is what is needed to make the government shift its policy then please for goodness sake make sure that the consumer fully understands the reasons for this change in attitude.

We need to make sure that the insurance industry does not take the blame for this. Communication is vital. Brokers, as always, are on hand to explain change to consumers, advising on risk management and finding suitable cover.