What is the future of flood cover?

The floods that swept through mid-Wales at the weekend have served as a timely reminder for government to act on the future of flood insurance.

Homes and businesses across the region were flooded after torrential rain caused rivers to burst their banks at the weekend, with a dam wall breached, causing an evacuation of 600 people from their homes.

And today the Environment Agency issued 36 flood warnings across England and Wales, with a warning for the River Mole at Charlwood and Hookwood in West Sussex and Surrey that requires immediate action.

Crunch point

While the costs of the floods have yet to be estimated and with further bad weather expected this week, it has reached crunch point for the Department for Environment, Food and Rural Affairs (Defra) to make a decision on flood insurance.

Defra minister Caroline Spelman was expected to reveal the government’s plans on flooding at the ABI’s property conference last month, having initially promised to make an announcement by the end of spring.

But instead she said the ABI and other bodies needed to have further discussions on the issue.

A matter of principles

Flood insurance is currently only available under the Statement of Principles between insurers and government, which expires in June next year.

The government is currently weighing up ideas from the ABI and Marsh, and the possibility of combining the two, but needs to move swiftly to come up with an affordable and sustainable solution for all parties concerned, with the ever-increasing threat of natural disasters hitting closer to home.

With some insurers writing policies that run up against the end of the statement, it is of paramount importance that a decision is reached sooner rather than later.

Desperate measures

In another interesting development, fraud in financial services, including insurance, is on the increase once again, jumping 16% quarter-on-quarter between January and March, according to the latest figures from Experian.

This is a worrying trend, which has continued from last year when detected insurance fraud rose 23% as people become more desperate in these increasingly tough economic times, as reported by the global information services firm.