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Flood and Water Management Bill

My Lords, I agree that this is an important subject. It is a matter of enormous concern to the people who are affected when they are seeking to insure their house, particularly after suffering from flood damage when they are seeking to get new cover. The issue of affordable insurance cover for flood risk concerns many Members of the House and indeed people outside. The noble Lord’s Amendment 107 calls for a system based on the principles of equity and shared risk, which is indeed a desirable system in cases where we do not know who will need to make a claim. The National Health Service is a good example of shared risk; most of the time none of us knows when we will need its expert care, and we all benefit at one time or another, so it is fair that we all pay towards its costs. Flood risk, however, is different. With increasing confidence we know where flooding will occur and even, on average, how frequently. While pooling together is important and fair for those facing similar levels of risk, it seems unfair for the five out of six homeowners not at risk to pay higher insurance bills to subsidise the few very high-risk homeowners, particularly when there are steps that can be taken to minimise the risk. For those most at risk, we need insurers to provide the incentive to make properties resistant to flooding—for example, with flood gates—and resilient to flood water. If homes are fitted with rugs instead of carpets and have raised electricity sockets and waterproof plaster, for example, householders can be back in their homes within weeks as opposed to months and any insurance claim will be much lower than otherwise, thereby minimising any rise in premiums and excesses. The Government currently have a voluntary agreement with the insurance industry called the "statement of principles", and the Welsh Assembly Government have a similar agreement. These mean that cover against flooding is widely available as a standard part of buildings and contents policies. Insurers are obliged to offer cover, even to those at significant risk, if there are plans in place to reduce it within five years. The voluntary approach means that we can safeguard the benefits and efficiency of a competitive market, which I think is of concern to the noble Lord, Lord Taylor, without the need to add bureaucracy at a time when in general we are trying to reduce it. However, we know that flood risk will increase with climate change. The Environment Agency states that investment will need almost to double in real terms during the next 25 years just to avoid more homes becoming at significant risk. The best way of safeguarding affordable insurance in the long term is to invest in risk management. Every pound that the Environment Agency spends on new and improved defences prevents £8 in future costs. We have improved our understanding of flood risk through the publication of the national flood risk assessment in June 2009. That is available to insurers and to the public through the Environment Agency’s website. It is in all our interests—of government, insurers, home and business owners, community groups and authorities—for there to be more investment in risk management, but the questions are how much more, who should pay and who should decide what level of risk people should have to live with. These are questions neither for the Bill nor for government alone. That is why my honourable friend the Minister in the other place, Huw Irranca-Davies, has already met MPs and the ABI to plan a flood summit. That will be held later in the year and take a comprehensive look at flood insurance. We think that there will be a series of meetings in which we expect the following groups to participate: the National Flood Forum, the Association of British Insurers, the British Insurance Brokers Association, the Local Government Association, interested MPs, insurance and social inclusion experts from the Treasury, the Department of Communities and Local Government and the Department for Work and Pensions. The summit will discuss how we can safeguard affordable insurance in the long term, taking account of the investment challenge due to climate change highlighted in the long-term strategy. We do not believe that government intervention in the insurance market to safeguard those few households who struggle to get insurance through a risk-pooling scheme is a workable solution, but we want to continue with the dialogue. As I have said, that will be going on later in the year. I hope that, with that explanation, the noble Lord will feel able to withdraw his amendment.