Flood Insurance for Businesses

Debate between Craig Whittaker and Melanie Onn

Monday 8th February 2016 Commons Chamber

[Craig Whittaker]

I suspect the solution is somewhere in the middle, with a joint partnership between both.

[Melanie Onn (Great Grimsby) (Lab)]

Does the hon. Gentleman agree that a strategy to provide upfront support for businesses, protecting their properties from flooding in the first place, would bring down insurance premiums, save the Government money on repair funding and save businesses lost revenue in the long run?

[Craig Whittaker]

The record shows, particularly in the Calder valley, which was flooded in 2012, that the Government invested quite a lot of money in flood prevention schemes, allowing people to invest in their homes. One problem we have, of course, is that although people live beside the rivers, they do not particularly prepare for these things. The evidence does not really show that putting flood prevention in reduces the risk with insurance companies. That is one of the serious issues that needs addressing.

Meanwhile, while the big boys talk some more, the businesses in Hebden Bridge are looking at a scheme called Watermark, which will give customers the choice of paying the normal price or the Watermark price for goods. On top of that, businesses will have the choice to pay into a generic pot as well—almost a savings plan. Although they accept that the pot will not cover all the damage done if and when the floods hit again, it will give them access to a pot that will allow some of their uninsured works to be done. That is something the ABI and some of its members perhaps need to start looking at, thinking out of their box and perhaps accessing some of their moral and social justice conscience.

To be fair, some insurers I have seen have done excellent work with their clients; in fact, they have behaved incredibly well. They include companies such as Aviva, which has pledged that the claims of their current small and medium-sized enterprise customers will continue to get cover and that those with excesses of more than £350 will not see those excesses rise when they next renew. Unfortunately, that is only for existing customers.

The British Insurance Brokers Association is in the process of creating a scheme for SMEs that will specifically include businesses at risk of flooding. BIBA’s expectation is that it will enhance the current situation by enabling up to 2,000 BIBA brokers across the UK to place those more difficult risks through the scheme, offering cover to the vast majority of businesses that have struggled in the past. My understanding is that BIBA is in advanced negotiations and that it aims to launch the scheme this year. However, I have spoken with BIBA, and the scheme uses only products that are already on the market. It also seems to be quite a complex system of protection for the carrier and protection for the property that is to be insured, with a further policy to reduce high excesses. How will the scheme assist businesses with the excessive terms and conditions that act as a barrier to insurance already? Will it help to reduce some of the unreasonable levels of excess that make cover unaffordable in many cases?

May I request that, in communities such as the Calder valley, the Government work alongside small businesses to identify the gaps in the market and to understand what prevents some businesses from receiving adequate flood cover? Relying on the DEFRA report is just not good enough; the evidence is not there, and we need to go out there and get it.

It remains to be seen whether BIBA’s new scheme is the innovative solution the market requires. However, I do know how desperate businesses are in my constituency and in those of other hon. Members—those constituencies have probably not suffered quite as badly, but these things are pretty grim for anyone who is in this position. These businesses are relying on a long-term solution being found. I sincerely hope that the Government are able to identify the gaps in the market, to better understand the nature and extent of the problem and to work with the insurance industry to develop a new facility to address these issues.