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Future flood prevention inquiry: Environment, Food and Rural Affairs Committee call for submissions

Last updated: 15 Feb 2016

Consulting body:
Environment Food and Rural Affairs Committee
Period of consultation:
Runs from 5 February 2016 to 26 February 2016
CML action:
Preparing response

The EFRA Committee has announced an inquiry into future flood prevention in England, following severe flooding this winter.

As part of this inquiry, the Committee will look at flood insurance.  With the new Flood Re scheme coming into operation in April, written evidence is also welcome on how accessible and affordable flood insurance will be for businesses as well as householders covered by the scheme. 

The CML and stakeholders have previously expressed concern about the potential for limited choice and higher costs of commercial insurance policies required for leasehold and PRS properties with BTL mortgages.  These are essentially commercially insured homes and, as such, excluded from the Flood Re scheme which can only accept domestic policies.

The availability and cost of buildings insurance with flood cover for both domestic and commercial policies once Flood Re is operational will be difficult to predict.  This will be particularly so for policies not covered by the scheme.  For these policies, market pricing will apply immediately upon the falling away of the current Statement of Principles.  For domestic insurance, if Flood Re does what it is intended to, then favourable availability and pricing should continue.   With the recent floods, however, there has been a swell of reports about customers struggling to find insurance or being quoted much higher premiums and excesses than previously.  No doubt, the inquiry will receive a fair amount of anecdotal evidence to this effect.  The attached extract from an oral question to Elizabeth Truss on 4 February refers to an example. 

Government has previously commissioned a research project on price and availability of flood insurance.  Findings published in November 2015 (although the research was commissioned in summer 2013) were opaque and seem to suggest there was no substantial evidence of a problem. 

We will continue to press the point that government should actively monitor and report on the insurance industry’s response in terms of pricing and availability of policies for households excluded from the scheme after it is operational.  We are of the view that if lack of availability and high prices for excluded groups becomes a significant issue, this will need to be addressed by government and the insurance industry.  In this regard, consideration could be given to developing an alternative scheme or product (e.g. Flood Re 2) for commercial policies. 

We intend to make a short submission to the Committee’s inquiry. 

If there are any points or concerns you would specifically like to see reflected (or if there is any evidence you can provide), then please respond to by close 26 February 2016.