News story

First monthly meeting with insurance industry on flooding

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Ministers met insurance industry leaders to discuss how the industry is stepping up to help hard-working people affected by the floods.

The CEOs of Aviva, Direct Line Group, Axa, Lloyds Banking Group and Ageas, along with the Claims Director of RSA and the Association of British Insurers restated their commitment to voluntarily maintaining the 2008 Statement of Principles on flood insurance until the guaranteed affordable flood insurance scheme, Flood Re, is delivered in 2015.

The Flood Re scheme was agreed between government and industry last June. The insurance companies assured ministers that there has been no evidence of insurers raising premiums for flood risk properties in advance of Flood Re starting in 2015.

They also advised that there is currently sufficient capacity of loss adjusters and specialised drying equipment to begin the repair and restoration process as soon as possible after the flood waters recede (typically starting with a loss adjustor arriving within 3 to 7 days of the time at which the water has receded and access is feasible), and that they would keep this under review.

Monthly meetings

It was agreed that there would be monthly meetings between the government and the insurance executives to make sure everything possible was being done to provide prompt and full payment to customers, and to ensure that government and the industry were fully co-ordinated in helping flood victims.

Read the Association of British Insurers’ booklet on what to expect from your home insurer.

24 hour flood helplines

The insurance companies will continue to operate 24 hour flood helplines that can authorise immediate emergency payments at any time of the day or night. Ministers asked the companies to use lines with local network rates rather than premium rates. Insurers emphasised affected households are being contacted proactively, including by email, and call-backs will always be agreed to save the householder money.

Technical experts for “repair and renew” grants

The insurance industry will supply a team of technical experts to help ensure the new “repair and renew” grants, announced by the Prime Minister last week, are used to maximise homeowners’ future flood resilience, and are part of the claims processes to ensure maximum take-up. Ministers and the industry agreed that the grants should make a contribution towards enabling households and businesses affected by the current floods to get affordable insurance in the future within Flood Re. Ministers will draw on independent research to quantify the expected impacts of the grant scheme on the cost of insurance.

SME access

The insurance companies asserted that there were no issues with SME access to the insurance market and that they continue to provide insurance on a competitive basis. Ministers have asked business groups to identify any evidence of problems from small businesses.

Leaseholders in high risk areas

Insurers also stated that the small number of leaseholders in high risk areas who will not be covered by Flood Re will still be able to access affordable insurance commercially. Ministers have asked the leaseholder groups to identify any evidence of problems which they will then pass on to the industry.

Flooding Minister Dan Rogerson said:

We had a positive and constructive meeting with the insurance industry on the steps that they are taking to get people back on their feet as quickly as possible after the flooding.

We were reassured that they have already put in place a range of measures to look after their customers, and we have agreed with them further steps to help the recovery process including providing a team of experts to advise on delivering the new repair and renew grants and a commitment to reviewing the cost of 24 hour flood helplines. We will continue to meet on a monthly basis to ensure an effective, coordinated response.

Otto Thoresen, Director General of the ABI, said:

Insurers assured Ministers the situation is under control and that customers have been helped speedily and effectively since the flooding and bad weather began in December. They emphasised the long recovery process ahead and their commitment to helping customers through this difficult time.’

Meeting attendees

The meeting was attended by:

  • Cabinet Office Ministers Oliver Letwin and Jo Johnson
  • Flooding Minister Dan Rogerson
  • Communities Minister Brandon Lewis
  • Paul Evans, CEO, Axa UK and Ireland, Deputy Chairman, ABI
  • Maurice Tulloch, CEO Aviva UK and Ireland
  • Tom Woolgrove, MD Personal Lines, Direct Line Group & Chair, Flood Re Project Board
  • Craig Thornton, Director, General Insurance, Lloyds Banking Group
  • Andy Watson, CEO, Ageas UK
  • David Pitt, Claims Director, RSA
  • David Williams, MD Underwriting, Axa UK
  • Otto Thoresen, DG, ABI
  • Huw Evans, Deputy DG and Director of Policy, ABI
  • Aidan Kerr, Head of Property, ABI

What is Flood Re?

Flood Re provides homes at high-risk of flooding with affordable flood insurance. It replaces the Statement of Principles from 2015 – a voluntary agreement with industry that guaranteed availability of insurance but not affordability.

Under the scheme, the 1 to 2% of homes at the highest risk of flooding will have their insurance part funded by Flood Re, allowing their flood insurance premiums and excesses to be capped according to Council Tax band. The UK’s other 99% of homes will continue to access the free-market for insurance.

Flood Re will be funded via a levy on insurers. Premiums for low risk householders will not go up.

Insurers have agreed to continue to abide by their commitments under the 2008 Statement of Principles until Flood Re comes into force in 2015.

For the 1% of high-risk homes covered by Flood Re, a small number of homes are excluded. These include:

  • properties built after 2009 to avoid incentivising building in the most high risk areas - this is a continuation of the 2008 Statement of Principles Position
  • Band H homes
  • leaseholder properties - this is because freeholders are legally responsible for buying building insurance for their leaseholders (on commercial rather than domestic terms, and commercial properties are not covered by Flood Re)

Insurers stated today that the small number of leaseholders in high risk areas not covered by Flood Re will still be able to access affordable insurance commercially. Ministers have asked the leaseholder groups to identify any evidence of problems in this regard.

Businesses are not covered by Flood Re, because they can access the commercial market and we do not believe it is appropriate for a consumer levy to fund commercial organisations. Insurers today asserted that there were no issues with SME access to the insurance market and plenty of capacity to continue to provide insurance on a competitive basis. Ministers have asked business groups to identify any evidence of problems in this regard.