At the start of the month I took part in a debate in Parliament on the issue of insurance for households and businesses affected by flooding (you can view my speech at 2:17:30 in the video opposite).
The context of the debate was the imminent expiration of an agreement between the UK Government and the Association of British Insurers (ABI) regarding the provision of flood insurance.
Under the so-called statement of principles, the ABI is committed to providing flood insurance to households at significant risk of flooding provided the local authority has announced plans to reduce the risk in the near future. This agreement expires on 30 June this year.
Research conducted by the Centre of Expertise for Waters (CREW) at the University of Dundee has estimated that the statement of principles has resulted in subsidising households in flood risk zones to the tune of £430 per household. This cost is met by including a small charge on all insurance premiums.
Without this protection, there is significant concern that households on low incomes, elderly residents and social housing tenants will face difficulties in meeting the increased cost of insurance and excess charges.
Focus groups conducted by CREW found that some individuals would be forced to forgo insurance cover while homeowners who require insurance as a condition of their mortgage may find themselves with a lack of freedom to move home.
With the effects of climate change leading to predictions of increased incidence of flooding, the need to find a long-term solution from after June this year is pressing.
One of the challenges identified by CREW is the insurance industry’s concern that they do not have access to information on flood defence improvements which has made it difficult to accurately assess current risk in some areas. I am pleased that local authorities across the country have now agreed to make this information available. I have called on the Scottish Government to push for this happens as soon as possible to ensure that insurance companies cannot claim ignorance of the facts.
A major action that could be taken now would be to require insurance companies to pay for better repairs where flooding does occur. If a building has been damaged by flooding, I believe it makes sense to make repairs which minimise potential flood damage where it’s possible. Ensuring that repaired buildings are more resilient against flood risk could be addressed through changes to building standards.
There is also a significant role for the planning system to ensure that where developments are given the go-ahead in flood risk areas, they include appropriate flood resilience and mitigation features.
These discussions have an impact on areas of Edinburgh affected by flooding around the Water of Leith. Since the terrible flooding in 2000 the estimated cost of the flood prevention scheme has escalated from £12 million to over £80 million.
Under the previous funding system the Scottish Government would pay for 80% of the cost of flood protection projects with the Council funding the remaining 20%. However, Edinburgh Council Tax payers now have to pick up the entire cost.
This has inevitably led to delays and increased costs as the Council was forced to proceed on a phased basis which required a costly re-tendering of the work. Meanwhile, 13 years on, many homes along the Water of Leith remain at risk of flooding.
Alongside the distress of the damage that serious flooding causes, the impending changes to the insurance landscape will be an additional worry for homeowners. It is therefore vital that the Scottish Government continues to work with the UK Government and the ABI to find a workable long-term solution.