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Flood insurance: Residents left high and dry as last low-cost insurer gets out

Finding flood insurance is ever more difficult – nearly five years after the Hull flood – and a government agreement is expiring

Householders in flood-hit properties have been dealt a further blow in their battle to get insurance as one of the last remaining insurers willing to offer them cover has changed its stance.

Sainsbury’s Finance offered low-cost insurance to homeowners and tenants whose properties had previously been flooded, whereas dozens of other major insurance companies turned them away. According to the National Flood Forum, a charity offering advice and support to communities and individuals at risk of flooding, or who have been flooded, Sainsbury’s appeared to offer cover to nine out of 10 people it sent its way.

The policies were underwritten by Halifax Insurance. But in the past few weeks the bank has changed its underwriter to RBS Insurance, which appears to be declining the majority of flood cases the charity sees.

Chris Wright, who deals with insurance queries at the National Flood Forum, says: “Towards the end of last year around 90% of the people that came to us unable to get cover were then subsequently granted cover by Sainsbury’s. Some had made phenomenal savings by going to Sainsbury’s. Now we are struggling to find an insurer that stands out.”

She adds: “Since the bank has changed underwriter our job has become so much harder. Now I understand it won’t quote for anyone that has been flooded in the last 10 years.”

While many householders are struggling to get insurance, and others are offered cover at a price they cannot afford, the situation is set to even worse after June next year when a voluntary agreement between the insurance industry and the government ends.

The Association of British Insurers warned earlier this year that up to 200,000 homes in England and Wales will struggle to obtain adequate flood insurance next year. The current agreement states that insurers must include flood cover as standard for properties built before 1 January 2009, where the risk of flooding is low. Crucially, insurers must also allow at-risk households who already have flood cover to renew automatically with the same insurer, as long as flood defences are planned to be in place within five years.

The industry and the government are now locked in a battle over what should happen next, with insurers reluctant to continue to offer cover without government commitment on flood defences.

RBS Insurance says: “We have been working with the Association of British Insurers for several years, in an attempt to influence government regarding the provision of a sustainable national plan for flood prevention and also to maintain widely available and affordable flood insurance for all customers. The current Statement of Principles is unfair to consumers and to insurers, as it does not offer the level playing field which we all expect. This situation needs urgent attention. We will continue trying to find a solution to this dilemma, as the 2013 deadline for the termination of the Statement of Principle (flood insurance) agreement is fast approaching.”

Wendy Walters, 62, from Hull was one of the householders helped by Sainsbury’s. She and her husband lost everything in the floods that hit the city in 2007, including their much loved pet budgerigar.

“The fireman had to carry me out of the property as I’m not steady on my feet,” she says. “We were out of the house for a year while it was repaired, but luckily our insurance covered everything.”

However, when the couple came to renew their insurance company quoted a premium of £750 with an excess of £15,000. They had previously paid £250. “We couldn’t afford the premium nor the excess had we been flooded again, so we called some other major insurers, including the Halifax,” she says. “They all turned us down because our postcode was in a high-risk flood area.”

The Halifax was unable to explain why it could cover the Walters through a Sainsbury’s policy but not its own, but said insurers often apply different underwriting criteria to their own policies compared to those they underwrite for other brands. A spokeswoman said: “Every insurer takes a different view of risk.”

The couple contacted the National Flood Forum after hearing about it on a radio programme. The charity suggested they try Sainsbury’s, which offered to insure them for £252, with a £2,000 excess. “I can’t tell you what a relief it was,” says Walters. “We worry constantly about not being able to get cover again. Every time it rains you look out of your window and worry.”

Another Hull couple, Ron McDougall and his wife Pam, have been able to get insurance with their existing provider, Halifax, because of the agreement that existing policyholders should be able to buy cover. However, they are worried this might not be the case next year.

During the 2007 flood, the McDougalls watched helplessly as the rains washed up their road, through their back and front doors and up through the fireplace. “Within seconds we were standing in nine inches of water that then sat there for a week,” says Ron McDougall. “When I went out to the shed, our rabbit hutches were floating on water with the animals still in them.”

Halifax sorted out the couple’s house repairs and temporary accommodation quickly, says McDougall, but inevitably this came at a cost. “Our premium went up from about £300 to £800, though we negotiated it down to £650,” he says. “It is a lot of money but we tried to get insurance from a number of other companies and they were having none of it. I am concerned that we are not going to be able to sell our house if no one will insure us next year, so I’m just praying the Halifax won’t turn us down.”

On Wednesday, resident’s associations, actions groups and representatives of the insurance industry and the government will get together for a conference on the future of flood insurance.

Charitable organisation The Joseph Rowntree Foundation will release a report that argues against insurers pricing out flood-hit households purely based on risk. It wants the government to provide a solution that protects the lowest income households from being left uninsured. In France, for example, a compulsory premium for natural disasters is standard in policies, regardless of the level of risk.

“Any just policy must find some place for social solidarity in the design of insurance arrangements for flood,” the report will say. “The alternative is to create a situation in which we would be predictably causing not only a sizeable swathe of blighted properties, but also very many blighted lives.”

Sainsbury’s defends its decision to switch underwriters: “Our new products, designed with the Sainsbury’s shopper in mind, offer a range of quality features and benefits including unlimited buildings cover (available with our Premier Cover) and a discount of up to 15% on premiums for Nectar card holders, as well as double Nectar points on all their shopping and fuel for two years (available on our Premier Cover).

“Sainsbury’s Finance, together with its partner RBS Insurance, is committed providing home insurance to as many people as possible as well as providing quality cover and a fair price.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds