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.



Joe Public said...

"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."

Are ministers really that 'thick'?

Of course insurance companies will adjust their premiums to reflect their risk. Their entire business model is based on taking premiums & avoiding paying out.

The other side of the coin is if an insurance company is prepared to offer flood insurance for your property, refuse to pay the premium because you know statistically there's minimum risk. QED.

dognamedblue said...

there's reasons why we're being flooded, not that people want to admit/accept them
first is BP's sinking of the oil on to the north atlantic drift current starting in the gulf of mexico from their deep water horizon disaster, I mention this because now BP want to carry on deep water drilling off the coast of scotland, where I might add they've just discovered an ancient settlement of upto 70,00 people in the north sea. as we know the sea affects the atmosphere, the atmosphere effects the sea in terms of weather. chaos theory

then the geoengineering they've been doing, I would point people in the direction of the house of commons select committee on science & technology's fifth report on geoengineering, not that they claim they're doing it, just it needs five reports to keep people up to date on something they are not doing
the scientists involved with it have said & are on record "once you change the weather systems you can't change them back"
we should be having glorious weather, in a cycle that was here after WW2, but we're not
not to worry there'll be 17,000 more soldiers to protect out olympics :)

dognamedblue said...

not sure what to make of this possible solution:

do you dare believe it or is it just another con trick?

Pavlov's Cat said...

Don't forget (it's in the small print) the Govt cut.

It's called IPT (Insurance Premium Tax) and is 6% of any policy , went up from 5% in 2010 , kept that one quiet didn't they.

So higher premiums for us, more profit for their chums and more Tax for them.

Trebles all round

Joe Public said...

dognamedblue @ 12:22

I'm intrigued by your theory that deep-water drilling in the Gulf of Mexico causes flooding in the UK. (And not, for example in Texas, which is slightly closer.)

Surely, if oil is extracted from an undersea hole in the ground, then there's more space for seawater to sink into, and so help alleviate flooding?

With the local floods we're having in the UK, shouldn't we encourage more boreholes?

banned said...

There was a Govt spokesthingey on Beeb Radio (2-4?) today saying that agreement on a new deal had not been reached so it is a secret but it sounded like we will all be expected to share the pain (like car insueance) ie those of us living in non floody places will subsidise the stupid and ill advised ones who do.

As infants in the 1960's we had to walk to the Big School for Dinner, this involved going through the town* park which was on either side of the river. Sometimes the park got flooded which meant we had to paddle to get to the bandstand.
One day they spoiled our fun by building houses where the bandstand use to be.
Next year the houses got flooded and we said to ourselves
"Well we knew that and we is only 6"

*Ashbourne, Derbyshire.

subrosa said...

In answer to your question I would say some are Joe.

Flood is written into my policy Joe but I will question it when I renew it.

subrosa said...

Thanks for your comment dognamedblue. I must google the discovery of that settlement.

subrosa said...

I'll have to wait for expert advice on the Keshe Foundation dognamedblue. Don't know enough about it to form any opinion.

subrosa said...

Trebles all round right enough. I should have mentioned the IPT in the post PC, so thank you for highlighting it.

subrosa said...

And that is still happening all over the country banned - councils allowing building on flood plains.

Brian said...


It is the homeowner's responsibillity down here to investigate hazards to the property during the local authority search stage. The Environment Agency's Flood Map should be consulted before committing oneself to 25 years of mortgage fun on a house. As for trusting an Estate Agent, well most are very nice but I wouldn't buy I house off them ;-) - The Property Misdescriptions Act was passed for a reason.
As for dry-footed homeowners further subsidising flood-prone houses, I look forward to the reactions of car-driving owners of houses on flood plains being made to pay extra on their car insurance to make it possible for young, inexperienced drivers to get insurance for less than the couple of thousand quid a year they are quoted at present.

subrosa said...

Now there's an idea Brian. I may suggest it next time I phone my car insurance bunch.

I ended up having mine on my insurance for a few years until they were earning enough to go it alone.

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