Flood damage to exceed £2 billion, rise in premiums unlikely

The Association of British Insurers (ABI) estimate that the June flood bill stands at £1.5 billion and this, together with the damaged caused by the floods in July, is likely to make 2007 the worst for the insurance industry for nearly 17 years, when it paid out £2 billion in claims.

The insurance industry is now expecting that claims for flood damage this summer may well exceed £2 billion. Insurance companies are having to bring extra staff in to deal with the work involved and Direct Line has informed policyholders that service will be slower than usual with people waiting around 5 days before being visited by a claims assessor. It has also requested that policyholders not affected by floods to delay making a claim.

However, the ABI does not anticipate the level of claims to impact negatively on premiums and says that insurers will have planned for such measures. The insurance industry has also promised to adhere to its Statement of Principles on flood insurance, under which it has agreed to continue insuring people in areas where there is a danger of flooding but this is heavily dependant upon the government maintaining flood defences. Currently, the government plans to increase spending on flood defences to £800 million a year by 2010 but the ABI would like to see an increase immediately in the flood defence budget.

Discuss this in the Finance Markets forums

Story link: Flood damage to exceed £2 billion, rise in premiums unlikely