Err, what?

Hundreds of thousands of householders in areas at high risk of flooding face losing their home-insurance policies next year unless the Government finds extra cash to rescue the industry.

Why don\’t they just charge higher premiums?

Then you read on and there\’s a fuss about govt help, did govt live up to its side of the last deal, where\’s the money etc.

Then you get this:

“It has been a very expensive time for the industry because of a spate in floods which cost us £3 billion in 2007. If the talks break down then an open market operates, with no guarantees of premium limits.

“It is quite possible that insurers won’t be able to provide cover at all in certain areas such as Tewkesbury and Cornwall, which have been subject to the most severe flooding in recent years. In other cases they might demand premiums of say £10,000, which would be unaffordable in most cases.”

Although nearly 2.8 million homes are at risk of flooding from the sea or rivers, and another 2.3 million are at risk from surface flooding, insurers have identified the 200,000 properties with the greatest risk. But the industry admits that those in “medium-risk” areas could also be stung by hefty premiums, if an open market prevailed.

Err, perhaps houses in Tewkesbury shouldn\’t actually be insured against flooding then? Or perhaps the premiums might really be £10k?

Defra said yesterday that talks were continuing. “We are working very hard with the industry on this complex issue,” a spokesman said. “We need a lasting solution that ensures affordable insurance bills for those at flood risk but does not place unsustainable costs on wider policyholders and the taxpayer.”

Why should flood insurance for a house that is likely to flood be affordable? Why should the taxpayer pay for you to live in that darling little water mill that floods every third year?

23 comments on “Err, what?

  1. Presumably the insurers want the government to undertake engineering works which minimise the risk of flooding. That’s one thing government can usually do quite well: or at least better than any “big society” attempt to coax thousands of homeowners to contribute to the town’s flood defences.

    The other point is that if the homes become uninsurable (or only at £10,000 a year), then the banks won’t grant a mortgage on them. Without a mortgage the price falls to the floor. In London an unmortgageable property (e.g. certain ex-council flats) will be snapped up by a buy-to-let landlord. But landlords want low-maintenace properties: even the dodgiest of landlords won’t touch a house that floods every three years.

    Ever since the late 80s / early 90s, politicians have realised that it’s electoral suicide to allow even the slightest fall in house prices. (This rule was confirmed when Gordon Brown lost the election in 2010, despite only fairly minor price falls.)

  2. Presumably the insurers want the government to undertake engineering works which minimise the risk of flooding.

    I’ve no problem with that if the area concerned hasn’t much of a historical record of being flood-prone. But if some dickhead has bought a house in a new development build unwisely on a flood plain, then tough shit.

  3. We just bought a new house. First thing I checked was its elevation and the local flood plain location. It’s not hard. I did it when buying my last house, too.

    But. Are flood plains moving? Is construction displacing them? Do developers and agents know and conceal this? Is this something the reasonable buyer could discover?

  4. Ok now that I’ve found a full version of the story without paying for the Times, it seems my initial assumption about building more flood defences is incorrect. What they want is a mandatory levy on everyone else’s insurance bill to pay for the higher risk of the 200,000 or so high-risk properties.

    This reminds me of how we all pay higher electricity bills to indulge the solar and wind fools.

  5. As I point out every time this comes up, it’s not hard to build/furnish/decorate a house such that being flooded every three years, or even every year, is at worst a minor annoyance.

  6. Gordon Brown lost the election because he was rubbish at being prime minister. I doubt that a few percent on house prices would have made a difference.

  7. You only have to mention the word ‘house’ and the entire country becomes deranged.

    Anyway, here’s a solution. We (the State/people) will make your premiums ‘fair’ by coughing up. In return, you give us, say, 5% of the equity in your property. That is also fair. The value of your investment is maintained and we profit as well.

  8. If development can cause areas that weren’t previously prone to flooding to be at risk, then there’s a very strong case for sharing the cost.

    You simply can’t develop land needed for runoff and not get flooding where it didn’t used to be.

  9. @ peter Risdon
    It’s not just developments that cause flooding where it didn’t use to be – it is also flood defences higher up the river that push the floods downriver.
    So a lot of the flood defences installed under the 2008 deal simply move the floods rather than abolish them and the insurers are still picking up a bill that they thought was being gradually eliminated.
    You are welcome to try to get DeFRA and the upstream local authority to pay insurers for the damage they cause downstream, but I don’t fancy your chances.

  10. Hydralic stilts that raise the house up to six feet above normal. If the floods are likely deeper than that don’t put a house there.

    No good for already built properties of course.

  11. Anyone who buys a house after it’s been flooded x times in the past few years should take their chances. However, it should be noted that flooding patterns shift, partially because of weather conditions, but more likely because of work done up or down river (displacement of the problem). The insurers and the insured in such a case do have a case for some form of relief.

  12. The ‘darling little water mill’ is unlikely to flood:
    1. It was built by people who respected the right of rivers to flood and
    2. most mills run off leats that are abstracted well upstream of the mill. This means that the mill itself is not at river level, but uses the drop back to the river, over or under the wheel, as the power source.
    3. Those down on the river were taller and used the lower floors as the machine rooms for a few cogs and shafts.

  13. Ian B,

    Disabled access legislation means that all new build properties have to have a ramp to either the front or back door and a low threshold, builders are incentivised to keep the floor level as close as possible to ground level.

  14. In short, we have planning regulations that make it very difficult to build a house, but don’t get in the way of house building in places where it regularly floods?

    Smart regulation anyone?

  15. Serf,

    Yep, if you raise the floor level it costs more to construct the ramp, your also limited on how high you can raise the floor level by the permitted gradient allowed for the ramp.

  16. Alan @14
    “Disabled access legislation means that all new build properties have to have a ramp to either the front or back door and a low threshold, builders are incentivised to keep the floor level as close as possible to ground level.”

    Does that actually have any effect? I can see the possibility, but surely it’s cheaper to build lower anyway? Does a ramp cost much in relation to a house? I’ve no idea btw.

  17. @Luke
    Unless you have a long space in front of each door the maximum slope for a ramp limits the height of the ramp. Also if you have an elderly couple, one of them will get exhausted pushing the other in a wheelchair up a 6 foot high ramp to ensure that flood risk is reduced. The cost of the ramp is relatively trivial.

  18. Watching The One Show (ugh, yes I know) report on this has completely changed my mind on this subject.

    I do feel that I should contribute to the resident’s insurance premiums and subsidise the insurance companies.

    Of course, nothing in life is free. I’m rather partial to Chateau Lafite and a rather nice Chablis Grand Cru, so if the residents would care to have a whip round to fund a bottle of each every day – one never knows whether it will be meat or fish! – I’ll consider it a fair swop.

    And if you breathe a word about my lifestyle choices, I might just punch you on the nose…

  19. Wombat – “Are flood plains moving? Is construction displacing them? Do developers and agents know and conceal this? Is this something the reasonable buyer could discover?”

    Rivers usually come in two sorts – broad and slow, or narrow and fast. If the river has a flood plain, then it will widen and slow. That means downstream will not be flooded as much. If, on the other hand, you build some houses on the flood plain, or construct some nice flood barriers to protect near by homes, when the river rises it will be constrained, it will be faster and it will be higher. That is, you will flood the people down stream.

    So flood patterns probably are changing. As the idiots in local government often allow new construction on flood plains. They are very tempting for a cheap buck after all. They are flat. They are often in a nice location near the centres of towns. There are usually roads near by. So developers make some money, the voters are happy and the council collects more rates. Until it rains.

    Peter Risdon – “In fifty years’ time people will be using cheap exoskeletons rather than wheelchairs and these ramps will be curios from another age.”

    I think it is more likely that in fifty years time people who need wheelchairs will be painlessly euthanised. But I agree ramps will be curios from another age.

  20. Was told recently about a house building company who were initially turned down on planning permission to build an estate as floods were possible. The company agreed to donate a sum to the council for flood defences (pumping station etc) and were then given permission. Of course the buyers all paid for that bribe/donation in their purchase price.

    The environment agency then gave that council money each year for maintenance of pumping station. Slight problem, the houses often have floods. This year severe floods. People who have owned houses there for some years decided to sue the builder – which is when it came out about the pumping station.
    A pumping station the council has received upkeep payments for.
    A pumping station, a decade after building the estate, that has never been built…..

    Understandably the local residents are a bit peeved at the council right now…

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