25th July 2014
Millions of homeowners whose properties are at risk of flooding could find themselves without any cover after being excluded from a new affordable flood insurance scheme.
The government and insurance industry had been part of a protracted stand-off over how to insure homes at risk of flooding. In 2000 the Association of British Insurers (ABI) said its members would insure flood-risk properties if the government continued to invest in flood defences.
However, the agreement expired in June last year and since 2000 investment in flood investments has been cut considerably.
After an impasse, the two sides agreed to a new insurance scheme entitled Flood Re and last week the Department for Environment, Food and Rural Affairs (Defra) put forward plans for a £10.50 levy on all home insurance policies to fund an emergency pot of money to deal with flooding disasters.
Effectively those in non-flood risk areas will subsidise those in flood-risk areas but although Flood Re will provide insurance for homes that otherwise would be left without cover, the British Property Federation (BPF) has warned millions of homeowners could still be left without insurance as the scheme plans to exclude leaseholders, of which there are over 3 million in the UK.
BPF said while those who own flood-risk freehold properties will be able to use the scheme to access affordable insurance, those who live in flats with a leasehold will not benefit due to the way Defra defines a ‘dwelling’.
Homes built after 2009 and those in council tax band ‘H’, which homes valued at over £320,000 fall into, will also not be eligible to access the scheme.
Ian Fletcher, director of policy at the British Property Federation, said: ‘Over the past few months we have been given myriad excuses for the exclusion of leasehold properties from Flood Re. These have ranged from the competence of computer systems, to the lack of hard evidence to quibbling over the difference between building and contents cover.
‘The fact that we achieved a small concession for leasehold blocks of three or fewer to be included within the scope of Flood Re only service to highlight the tenuous nature of these arguments and, on that basis, we would like to see the entire leasehold sector included.’