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December 29, 2012 2:12 am
From Dr E.C. Penning-Rowsell.
Sir, More floods have come, and the damage they cause; no doubt insurance claims will follow. David Cameron promises an extra £120m for the (c £0.5bn) flood mitigation budget.
But let us pause and consider how these are connected. Peer reviewed research here shows – and insurers informally confirm – that insurance premiums do not fall when flood risk is reduced. Most households pay much the same, irrespective of risk, averaging some £30 a year, but opaquely “bundled” within general policies. Excesses may rise if risk is severe, but these are very minor sums overall.
The beneficiaries of flood “defence” are not the insured householders (as we almost all are). We are no worse off financially after a flood (insurance compensates us, “intangibles” excepted) or better off after a flood scheme (premiums continue unchanged). The beneficiaries are the insurance companies and their shareholders (I declare a very small interest here): premium income does not fall as risk is reduced, but claims decline. That £120m lands neatly in their laps, as has the £0.5bn before.
Is this what is intended?
Edmund C. Penning-Rowsell, Flood Hazard Research Centre, Middlesex University, UK
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