In a rebellion against spending cuts, insurers are refusing to renew home insurance policies if improvements have not been made to flood defences
The government has slashed spending on flood protection by 27% to £259m in 2011-12 and many multi-million-pound defense projects in high-risk locations such as Leeds, Morpeth, Thirsk and York have been shelved. At the same time some of Britain’s biggest banks are refusing to renew buildings insurance for homes at risk of flooding, despite a government agreement with the industry to protect more than half-a-million vulnerable properties.
Banks such as HSBC are now refusing cover for their clients when they deem that the home’s are too risky and they are passing the policies to different underwriters and declaring that the customers are no longer its responsibility. A Lloyds customer was unable to sell his property because the bank would not extend cover to the purchaser.
The lack of cover has forced some homeowners to knock tens of thousands of pounds off their asking price to secure a sale and even then they may not be able to sell their houses except to buy to let investors at knock down prices.
The Environment Agency estimates that 500,000 homes are at high risk of floods. This would normally make them difficult to insure but under a “statement of principles” agreed by the industry and the government, insurers are committed to renew buildings insurance cover for existing customers and extend it to buyers of their properties provided there is adequate flood defense spending in place. The flood spending that has been cut. The current agreement ends in 2013 and these cuts will not help to secure a new agreement. Some insurers are already reneging on the agreement, according to Neil Cook one of our specialist brokers, who has dealt with about 200 cases related to non-renewals because of floods in the past 12 months, and the “vast majority” of these involved policies issued by high street banks.