Flood damage to exceed £2bn but premium rises unlikely

by Gill Montia

Story link: Flood damage to exceed £2bn but premium rises unlikely

The insurance industry is now predicting that claims for flood damage this summer could exceed £2 billion.

The Association of British Insurers’ (ABI) estimate for the June flooding stood at £1.5 billion and this combined with the damaged caused by the July floods is certain to make 2007 the worst year for the industry since 1990, when it paid out £2 billion in claims.

Many insurance companies are employing extra staff to deal with the huge increase in administration work and Direct Line has warned policyholders that their service will be slower than normal, with people having to wait an average of five days before being visited by a claims assessor.

It has also asked policyholders not affected by the floods to wait before making claims for non-essential items.

Surprisingly the ABI does not expect the level of claims to impact negatively on premiums and says that insurers will have planned for such events.

The industry has also pledged to stand by its Statement of Principles on flood insurance, under which it has agreed to continue insuring people in areas where there is a high risk of flooding.

This is, however, dependent upon the Government improving and fully maintaining flood defences.

As things stand, the Government plans to increase spending on flood defences to £800 million a year by 2010/11 but the ABI would like to see an immediate increase in the flood defence budget.

Finally, Archie Kane, the current Chief Executive of Scottish Widows, has been appointed Chairman of the ABI. He succeeds Keith Satchell who has completed his two-year term.