The government has revealed details of a possible agreement with the insurance industry over the future of flood insurance.
Environment secretary Caroline Spelman confirmed last week that the government is considering an adjustment to the existing cross-subsidy that enables insurance companies to raise money from all policy holders to cover the cost of insuring homes at high risk of flooding.
The insurance industry has asked the government to formalise this arrangement, and also to correct an imbalance in the current market that allows some insurers to only offer policies to low risk customers while others have to cover many high risk properties.
The government claims the proposed changes will not place extra costs on policy holders or taxpayers, as the money already exists within the insurance industry.
Spelman said: “We are now considering a cross-subsidy mechanism that would ensure high risk households can get affordable insurance without extra costs being placed on policy holders or taxpayers.”
However, surveyors organisation RICS, which described the new proposals as “vague and unfair”, says householders in low risk areas should not have to subsidise those at high risk of flooding.
RICS associate director Alan Cripps said: “Not only does this penalise homeowners in low flood risk areas, but it is forcing homeowners and families who are already under financial pressure to pay extra to their insurance companies. And there is no indication of how this extra money will be used or managed.”
He added: “Once again, the government is passing the buck and is leaving others to pick up the pieces.”
Cripps said that a levy on all policies is unlikely to be sufficient to pay out if there are extreme flooding events. However, government is opposed to using public money to underwrite flood insurance, arguing that government funds are better spent on flood defences.
“The best and most sustainable way of keeping insurance affordable in the long-term is to help prevent flooding in the first place,” said Spelman.