Flood Insurance for Businesses

Debate between John McNally and Craig Whittaker

Monday 8th February 2016 Commons Chamber

[Craig Whittaker]

I am not sure that that is the sole responsibility of the Government. I think that there needs to be a joint approach between the insurance industry and Government, but, again, I will come on to that during my speech.

Although the ABI said that it would not turn down any small business for flood insurance, I can tell Members that, having spoken to hundreds of businesses in the Calder Valley over the past few weeks, it has become apparent that many small businesses are experiencing difficulties in accessing flood insurance and that this uncertainty, coupled with the crippling costs that now face some businesses as a consequence of the floods, is jeopardising their future. Although I note the Minister’s response that the Government are not aware of any evidence of a systemic problem, I question the basis on which that conclusion has been reached.

Last July, the Department for Environment, Food and Rural Affairs published the report “Affordability and Availability of Flood Insurance: Findings from Research with Businesses”. A cursory look at the report might lead one to conclude that there is not a problem after all. The research found that uptake of insurance across businesses is high. The survey showed that the vast majority of small businesses arrange commercial insurance cover for their premises and that there is no significant difference between small businesses that are located in high flood-risk areas and those that are not.

However, a more detailed consideration of the report, particularly the basis on which the evidence has been collected, provides a different picture. The headline figures from the report come from a secondary source, a small business survey run by the Department for Business, Innovation and Skills. The DEFRA report acknowledges that the BIS survey data contain only small numbers of businesses located in high flood-risk areas. As such, one may legitimately question how valuable such data are when considering the issue of insurance for businesses in high-risk areas. The main focus of the DEFRA report was a series of in-depth interviews with businesses, and it is that component that forms the main evidence base. Only 25 businesses were interviewed, the majority of which were not in high flood-risk areas. The overwhelming majority were very small businesses, employing fewer than 10 people, and only one manufacturing business was included in the sample. My point is that the evidence base of the DEFRA report is not particularly credible and, as a consequence, the report is of limited value. If they are to appreciate the extent of this issue the Government and the Association of British Insurers need to speak to businesses in areas of high risk.

[John Mc Nally (Falkirk) (SNP)]

As the recently appointed chair of the all-party parliamentary group on flood prevention, I can tell the hon. Gentleman that we had discussions with the hon. Member for York Central (Rachael Maskell) on this on, I think, 26 January. It became apparent in the debate, which was interrupted several times so that we could vote in the Chamber, that there was a great divide on whether there was evidence to show that businesses had been affected. Does he agree that the APPG should visit the sites so that we can witness the problem and speak to the businesses that have been affected by flooding?

[Craig Whittaker]

Of course, we would always welcome the APPG in the Calder Valley. In fact, we welcome anyone who would like to come and have a look. Indeed, if it helps us to make progress in this area and others affected by flooding, the whole group is very welcome, and I will help to arrange for businesses to talk to it too.

To appreciate the true extent of the problem, the Government and the ABI need to speak to businesses in areas of high risk, including those located in communities that have experienced a high frequency of flooding in recent times such as the Calder Valley. Calderdale Council says that between 40% and 50% of businesses cannot access flood insurance in five of my six communities, while our local insurance broker in the upper Calder Valley tells me that 20% of his clients cannot access flood insurance—ironically, including himself. True to the spirit of people in the Calder Valley, he has a desk and a mobile phone set up in the middle of all the building works in what was his office, working to ensure that his clients are sorted out. After the floods he, along with other brokers from around the UK in high flood-risk areas, were invited to London to highlight cases to the ABI. The journey turned out to be an absolute farce, as the ABI refused to look at those cases, saying that it was not allowed to do so because of data protection. The ABI says that there is no evidence of businesses not being able to access flood insurance, and cites DEFRA’s own report, which I have highlighted, to say that there is no evidence.