Parliamentary Connections

The UK insurance market is slowly retreating from offering flood insurance as a standard feature of household and commercial property policies. That is the message from the latest iteration of the Statement of Principles issued at the end of last week.
This statement was first put in place after the severe floods during the autumn of 2003 and was tested beyond its limits by last year’s double flooding whammy. The insurance industry has used it relentlessly since to put pressure on government to increase flood defence spending and tightening up of planning permission for developments on flood plains. No-one can blame the insurance industry for doing that. The UK market is the only market in Europe where flood insurance is readily available. With weather patterns changing and flooding become a more frequent occurrence, the industry is entitled to ask for better flood prevention and an end to the obvious stupidity of allowing developers to build on flood plains.
The Association of British Insurers has got a lot of what it asked for but knows that in the current economic and political climate it is no good returning to their desks at their Gresham Street HQ with an air of smug triumph and sitting back reflecting on a job well done. They have rattled the government’s cage again and again, dropping dark hints that the Statement of Principles – and the obligation to keep offering flood insurance that goes with it – might not be sustainable for much longer.
What we have now is some certainty as far as insurance company bosses are concerned: the agreement to keep offering flood insurance will come to an end in 2013. If we have another summer like last year before then, expect to see insurers queuing up under the exit sign.
In the meantime, the industry has trimmed back its commitment with immediate effect with some properties no longer eligible for flood insurance and, as the British Insurance Brokers’ Association rightly points out, some new builds won’t get insurance after the end of this year.
The industry has so far handled all this with some skill but it has set a timebomb ticking. 2013 might sound a long way off at the moment but as that cut-off looms closer and the reality of flood insurance suddenly being much harder to find, at least at affordable rates, there could be a political explosion that will be hard for the ABI to contain.

The tough lessons from the floods last year are still being learnt. Environment minister John Healey spent yesterday touring various caravan villages in the north of England to see at first hand how the 1400 people still living in caravans are coping. This visit prompted a wave of sympathetic publicity.
Meanwhile, as Mr Healey was hearing first hand about the problems of cleaning up after such devastating floods, the House of Lords was debating how to deal with the problems in the future.
The two most striking lessons that come out of the ministerial visit and the Lords' debate are both quite tough to take on board.
Several of the people still stuck in caravans complained that they would have been back in their homes by now if initial drying out and repairs had been done properly. This is a realisation of a fear that many in the insurance industry voiced in the immediate aftermath of the floods. Some loss adjusters and insurers were privately very critical of the way local authorities were trying to score points by getting people back into flood affected properties faster than insurers could: they warned that it could, indeed would, backfire and have sadly been proved right. While there is no doubt that a proportion of those 1400 still in caravans were insured and will have stories of delay and incompetence to tell, they will pale into insignificance compared to those who were not insured or were local authority tenants. To be fair to some of the local councils, they have done their best but have been struggling because of the lack of central government support - especially financial - to help them deal with such exceptional circumstances.
In the Lords, the tough lesson was about setting priorities.
This, it seems, is especially true when weighing up the cost of letting agricultural land flood versus letting towns flood. Rural interests were chided by Lord Davies of Oldham, the government minister, for attacking the Environment Agency for not doing enough to protect agricultural land from flooding. As Lord Davies and several other peers pointed out, the flooding of fields is often essential in order to protect towns and that is where the priority lies because of the greater threat to people and property.

The need for the insurance industry to be constantly vigilant on the fall out from last summer's floods was amply demonstrated in the House of Commons on Monday evening when the MP for Tewkesbury, Laurence Robertson, held an adjournment debate on the continuing problems and outstanding issues.
His main focus was the need to plan for the future with better flood defences and co-ordination among the various authorities with responsibilities in this area but he also reminded MPs and ministers that there are several hundred households still not back in their homes. While he was mild in his criticism of the insurance industry for this, it was clearly on his radar screen. He also raised concerns about the cost and availability of insurance in the future.
The industry has done remarkably well on all fronts since last summer's floods. On the ground, its response has won widespread praise and in the corridors of power it is winning the arguments about higher spending on flood defences and better co-ordination. It has also obviously done a very good job in keeping people well informed about progress on repairs and managing their expectations as there has been very little criticism of the industry from the estimated 1250 households in Gloucestershire alone who are not fully back in their homes.
The message to the industry - especially the Association of British Insurers - has to be keep it up, don't ever think this is last year's issue because MPs with constituents still living in caravans certainly won't.

The temperature of the row between the Association of British Insurers and the government over spending on flood defences keeps risisng. The government thinks it has been generous, while the insurance industry (and many others) believes it falls far short of what it required. Both sides have a point.
For the last couple of years the ABI has campaigned hard for spending on flood defences to be raised from the £570m a year currently budgeted to £750m a year. When the severe flooding in Yorkshire and Humberside struck at the end of June and the new Environment Secretary Hillary Benn almost immediately announced an increase in spending to £800m a year, appearing to trump the ABI. Of course ,we now know that increase is not immediate and will be phased in, not hitting £800m until 2010-11. Next year it will be £650m and the year after £700m. This partially explains the ABI’s anger and the industry’s feeling of being let down as the net effect on the spending plans is £100m lower than had been expected.
Of course, by the end of July we had another severe flooding incident, this time in Gloucestershire. No account seems to have been taken of this in the most recent public spending announcement. The government spending has stayed the same while the insurance industry’s claims costs have over doubled to more than £3bn for the two incidents. This clearly rankles with the industry.
Mr Benn was blunt in his defence of the government’s commitment to boost flood defence spending when he spoke at last night’s Post Magazine Business Leaders Forum Parliamentary Reception. He obviously felt hard done having announced an increase significantly above previous plans (ie before he upped the amount at the beginning of July) and was looking for praise and not condemnation. Such is the politician’s lot.
This argument will not go away. Mr Benn has very sensibly set-up an independent review under Sir Brian Pitt to focus on the lessons learnt from the floods – “what was done well and what could have been done better” in Mr Benn’s words. It is hard to imagine that this review will not make some very strong recommendations about the urgent need to protect our infrastructure better, water treatment plants and power facilities in particular. Will these be given priority over other planned but currently unfunded schemes? Will schemes to protect homes and businesses be bumped off the schedule to accommodate the recommendations of the Pitt review?
It will be very hard for the government, having set up the review, not to back its recommendations with additional spending. You can be certain that the ABI will be making that point very vigorously.
If the government doesn’t respond positively it will surely only be a matter of when and not if the industry starts withdrawing cover from the most exposed flood prone areas.

Did I hear wrong? I could have sworn I heard the floods minister Hilary Benn say during the sodden summer as people baled out flood stricken homes that there would be an immediate increase in spending on flood defences to £800m a year. Or, was that was I was meant to think I was hearing at the time?
Obviously, I should have read the small print. That wasn’t what he meant at all. He forgot to make clear that this increase wouldn’t kick in until 2010 at the earliest for that is what the new Chancellor of the Exchequer announced in the House of Commons this afternoon. Most likely Mr Benn would have liked to have the money to spend now but Mr Darling – seeking to earn his Treasury spurs – said no.
The insurance industry is rightly furious as the Association of British Insurer’s toughly worded statement straight after the announcement makes clear. What will now be interesting will be how quickly the criticism from flood prone regions starts to hit home. Cynically, one could have previously thought Labour wouldn’t be in too much of a hurry to spend money on flood defences because it is largely Tory held constituencies that get hit hardest. Surely, this summer showed that floods have no political favourites? Look at Hull, a Liberal Democrat Council and three Labour MPs.
With some schemes now set to be put back at least three years it is almost a sure fire certainty that before 2010 is out at least one area that could have been protected will be badly flooded. What will the government say then?

One of the issues I warned about when writing on the insurance industry’s response to the floods in the north of England before Parliament’s summer recess is starting to rear its head: the prospect that people who were uninsured get treated better than those who were insured. The rumblings from Hull over the last few days are an urgent warning that the government, local authorities and the insurance industry need to work very closely and communicate the same message to everybody affected by the floods.
The concerns were aired by some residents of flood affected properties in Hull who felt that more help had been offered to uninsured council tenants than insured homeowners. It is easy to see how such concerns can arise and how there can be many explanations as to why some claims take longer than others to sort out and, in particular, why some properties will just take longer to repair than others, regardless of who owns them. This is what the insurance industry needs to keep communicating, working closely with local authorities.
The moment the notion that being insured against floods makes little difference to how you are treated if the worst happens then everyone is in trouble. People will stop insuring, the public purse will be expected to bear a huge cost and local authorities just won’t be cope with the consequences of everyone turning to them when disaster strikes.

What are we to make of the government's response to the devastating floods in Doncaster, Hull and Sheffield?
One minute, the pleas for an uplift in spending on flood defences to £750m appear to be falling on deaf ears and then the next minute the new Environment Secretary, Hilary Benn, pops up with a pledge to raise the spending to £800m by 2010/11. Of course, it is a very welcome change of heart although pressure now needs to be applied to ensure that the increased spending is rolled out as quickly as possible. But why did it take such severe flooding to prompt it?
Whatever Gordon Brown says to try and distance himself from the media obsessed approach of Tony Blair, nothing galvanises a government more than headline coverage of thousands of electors in distress, especially when they come from your political heartlands. The trouble is this was a disaster waiting to happen somewhere in the UK, which is what the insurance industry has been saying for the last few years. It shouldn’t have taken last week’s deluge to get this commitment to spend on flood defences. The challenge now has to be to move quick enough to ensure that no more lives are lost and communities devastated as a consequence of the inaction of recent years. There should be no let up in the lobbying to get this new money spent effectively.

• One of the hardest parts of this to deal with will be the huge uninsured losses. We know that around a quarter of the population don't have adequate household insurance and that proportion is almost certainly much higher in the areas worst affected. Who should pay to put them back on their feet? This is obviously a question that is vexing the government and local authorities as their comments yesterday about waiting for the extent of insurance losses to be assessed before announcing the details of government aid reveal. There is a real problem here. Throw too much easy money at people without insurance and it will make those who bothered to protect themselves and their families properly wonder why they bothered: on the other hand, many of those without insurance are in a desperate state and must be given help. It is largely down to the insurance industry to demonstrate the broader benefits of having proper cover, such as speedy access to expert help, sourcing alternative accommodation, finding the right people to repair damaged property quickly and to the highest standards and so on. I know this is the minimum I would expect from my insurers.

As we watch yet another summer downpour, pressure is building up on the government to increase spending on flood defences. It is fast becoming an issue it cannot ignore.
The scientific and political debates about the causes, effects and future pattern of climate change will rage for generations to come but anyone who looks up at the skys and casts their mind back 10 or 20 years knows the stark reality: our climate has changed. When your home or business has been flooded out you aren't interested in the big picture debate: you just want to know how to stop it happening again.
We know we can't influence the weather directly, we also know that whatever contribution we might make to reducing carbon emissions is likely to benefit a future generation and have a negligable immediate effect. This means it comes down to protecting ourselves and our communities against the consequences of changing weather patterns and rising sea levels. Which is where flood defences come in and which is why the pressure from the Association of British Insurers and major insurance groups like Royal and Sun Alliance is intensifying. They need all the support they can get. Anyone in an area affected by flooding should be lobbying their local council, MP and the government for real action on this. The ABI's paper on climate change is focussed and practical and provides a sound background for anyone taking up these issues.
We know that flood defences are not cheap but they do work as they found out in Boscastle this week where a second disaster was averted because of a new defence system.
We also need to government to come to its senses and stop pursuing massive house building schemes on flood plains of which the proposed Thames Gateway development is the largest and most misguided. If this goes ahead future generations will curse us when they are faced with the awful dilemma of how to deal with a major tidal surge up the Thames estuary. Will they raise the (by then much enlarged) Thames flood barrier to protect central London knowing that this will inundate the Thames Gateway new town built on the Thames flood plain? You and I know what the answer will be and it won't be good news for those seduced into setting up home in Thames Gateway.