MP praises affordable flood insurance guarantee

1st July 2013

Alok Sharma, the Member of Parliament for Reading West, has welcomed the announcement made last week that the government has reached agreement with the insurance industry, which will guarantee affordable flood insurance to flood-prone areas in Reading.

After negotiations with the Association of British Insurers (ABI), this new agreement replaces the current ‘Statement of Principles’ that runs out at the end of July and will bring peace of mind to people who will soon need to renew their insurance.

The new agreement will cap flood insurance premiums, linking them to council tax bands so that people will know the maximum they will have to pay. This will be paid for by an internal industry levy, as proposed by insurers. This would formalise and capture the existing cross-subsidy that has allowed affordable cover to be made available to date. Therefore this can be done without placing pressure on bills in general.

New measures will also be added to the Water Bill, which was also published last week, to give the government legal powers to regulate the insurance industry to keep flood insurance affordable, if the agreement with insurers becomes unworkable. These powers would be used to require insurers to each take their share of high flood risk households or risk penalties and would create incentives for insurers to keep prices affordable. This would be known as a Flood Insurance Obligation.

The Chancellor also announced, as part of the Comprehensive Spending Review, that the government will continue to invest in flood defences and has provided a six-year long-term commitment to provide £370 million of capital investment in 2015/16, rising with inflation until 2020/21.

Alok Sharma, who has held several public meetings in recent months for his constituents to discuss issues around flooding and flood insurance, and has raised the matter of flood insurance with Ministers, said: “I am really pleased that the government has reached an agreement with the insurance industry, which means that people will no longer need to live in fear of not being able to get insurance and that those at most risk can get protection, now and in the future. The previous Statement of Principles, negotiated by the last Labour government, did not address the critical issue of affordability but thankfully this new agreement puts that right.”

Photo: Alok Sharma chairs public meeting on flooding in Purley