A 180m tax on home owners insurance to subsidise the premiums of flood-prone households is poor good value and badly designed, according to the government’s official costs rising advisers.
The Flood Re scheme, created by the govt and Association of British Insurers, costs 3 times much more than the rewards it’ll bring, the Committee on Our planets atmosphere (CCC) warned on Thursday. In addition, it said the scheme does little to encourage homeowners in flood risk areas to cover their properties, therefore only postponing the situation of going through increasing flooding.
The Environment Agency predicts more homes shall be at riskly of flooding in coming decades, along with the most effective case scenario. This rising risk is the best impact of climatic change over the UK, as per the government’s own scientists.
However, the coalition government has cut overall flood defence spending, despite injecting emergency cash after major floods in 2012 and 2014. No more a youthful agreement with insurers to supply universal and affordable insurance to acquire rising government purchase of defences has long been extended while Flood Re is set up.
Professor Lord John Krebs, who leads the CCC’s improve changing to global warming, wrote to Brendan McCafferty, the principle executive of Flood Re. He warned: “Flood Re is defined to subsidise many hundreds of many households greater than the estimated number which may struggle to afford cover in the free market. That makes Flood Re needlessly expensive and renders the costs three time the economical benefits.”
Flood Re is set to subsidise flood insurance for 500,000 homes but only 200,000 would battle to get affordable insurance, said Krebs, quoting insurance industry data.
Krebs also warned that such as the most high-ticket homes C individuals band H for council tax C became a “retrograde step”. He added that because Flood Re would fork out all claims entirely, there wasn’t any risk to the homeowner or their insurance company, bringing about a “risk that claim costs will spiral”.
A spokeswoman for Flood Re said: “Measuring the use of Flood Re with regard to economic return won’t take account in the significant benefits that it’s going to enable for tons of clients round the UK who, even without Flood Re, would face the awful prospect of suffering flooding with no capacity to access affordable flood cover.”
She said the scheme could save the us govenment quantities of pounds: “Flood Re is being built through the insurance industry and, who have’nt experienced it, the fee for helping people rebuild their lives after the flood would either fall to government or to the victims themselves.”
A spokeswoman to the Department of Environment, Food and Rural Affairs said: “We urge individuals to protect their properties within the potential for flooding. Flood Re aims to protect persons in the very best flood risk areas from spiraling insurance fees but, crucially, not at the expense of other householders.”