A scheme designed to extend affordable insurance cover to the growing number of homes at risk of flooding has been criticised as “needlessly expensive” by government advisers.
The chairman of the independent Committee on Climate Change this week called for a proposed national flood fund, known as Flood Re, to be scaled down to minimise the cost to UK homeowners.
In a letter to the new chairman of Flood Re, Lord Krebs said that the scheme — devised by the government and insurers to cap premiums for at-risk properties— offered poor value for money in its current form.
“Flood Re’s costs are higher than necessary at the expense of other households’ insurance bills,” he said. The government last year estimated that the costs would outweigh the benefits by three-to-one.
The scheme, which should reduce premiums for an estimated 350,000 homes that would have struggled to find affordable cover, will be funded by a universal levy on insurance policies.
According to the Association of British Insurers, this will equate to an average of £10.50 per policy, but this cross-subsidisation of high flood risk properties already exists informally.
Lord Krebs called for Flood Re to be narrowed in order for this levy to fall, and described the recent inclusion of large homes in council tax band H — previously excluded from the proposals — as “a retrograde step”. Properties built after 2009 remain excluded.
The CCC is advocating the mitigation of flood risk, including improving the resilience of flood-prone homes, as an alternative to subsidising insurance.
“Managing flood risk will always be the best and most sustainable way of securing affordable insurance in the long term,” Lord Krebs wrote.
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