Thursday, 12 July 2012
Another Stealth Tax
The Environment Secretary, Caroline Spelman, has disclosed she's in talks with the insurance industry about a scheme which could add 10% to a householder's home insurance policy, according to the Telegraph.
She's proposing the increase, which could be in place within months, in an effort to raise enough money to cover damage in the aftermath of severe flooding which can reach billions of pounds in insurance claims.
In certain areas of the UK thousands of homeowners affected by this summer's floods face higher premiums when they renew their annual home insurance policies and some have seen premiums rise by up to five times, while others have been told they must pay the first £5,000 of any future claim.
In 2000 a deal was struck between the then Labour government and the insurance industry to continue to cover the majority of customers living in areas prone to flooding in exchange for government promises to strengthen flood defences. The deal is due to expire next year and no replacement scheme has yet to be finalised.
Ministers are concerned that some insurance companies are able to 'cherry pick' customers in low-risk areas and refuse to offer cover to home owners in flood-prone situations.
When I returned to live in Scotland I found a rather pleasant house in a village near my parents. My father was ill with prostate cancer at the time and I thought being close to them would be of some help. However, my father was emphatic that I should have nothing to do with the property and explained it had been built on a flood plain. After doing a little research and even though the estate agent assured me no home on the small estate had ever been flooded, I took my Dad's advice and found a home further afield. The estate agent's advice was worthless, because he omitted to add the houses were only five years old.
I was fortunate in having advice from a 'local', but others were obviously not so lucky. Only three years later the whole estate was flooded by the River Earn and the repair costs were well into the millions. I heard many house owners were unable to insure their property again and one couple took radical steps and had their house lifted and placed on a three foot high base. They knew if they tried to sell the property that they would lose thousands of pounds so thought it was worthwhile spending thousands ensuring it was safe from flood water.
But it's not the house owners who are to blame if the estate agent/solicitor who handles the purchase of their property doesn't inform them that their prospective home is at risk of flooding. It's local authorities who are responsible. Planning departments all over the UK are happy to give permission for developers to build on flood plains without ensuring they build strong flood defences prior to any property.
Why should every home owner be forced to pay for irresponsible councils?
Perth, a bonny city, had a long history of flooding caused by the River Tay. Many properties at the riverside are handsome, older buildings which over the years became more prone to flooding. The reason was that the council planners were giving the go-ahead for more and more developments further upstream; thus unnaturally narrowing the river and once it entered the town it found easy outlets. Less than 20 years ago Perth and Kinross undertook an expensive flood defence programme and since then there have been no problems with riverside properties flooding.
Shouldn't other councils be taking a leaf out of my local council's book and start dealing with their long-term flood problems rather than sitting back and expecting the insurance business, through policy holders, to pay?
Hebden Bridge in West Yorkshire was hit by rising flood damage twice in two weeks. I know Hebden Bridge and it has been prone to flooding for years yet only now West Yorkshire council intend to do anything about it - but not quickly. It will take six months for plans to be drawn up and taken to the regional flood defence committee to identify funding sources and possibly another couple of years or more before there is any chance of work beginning on the town's drainage system.
Meantime all householders will have a large increase in their premiums. Another stealth tax.