Flood-hit firms face soaring insurance premiums

Flooding near the centre of Pickering, North Yorkshire
Flooding near the centre of Pickering, North Yorkshire
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SMALL businesses across Yorkshire ravaged by devastating floods now face years of soaring insurance premiums and excess levels after being told they will receive no help from the Government’s long-awaited national flood insurance scheme.

MPs, council leaders and small business groups have hit out after the Department for Environment, Food and Rural Affairs (Defra) said that following lengthy negotiations with the insurance industry, small businesses are to be excluded from the new publicly-funded “Flood Re” programme.

The announcement is a severe blow to thousands of small firms in rural areas that have struggled to obtain insurance owing to a growing risk of flooding.

The Government claimed there was “insufficient evidence” that the new national scheme – set up to ensure people at risk of flooding can still obtain affordable insurance – should be extended to small businesses. Defra was lobbied to exclude small firms by the insurance industry, which insists few businesses are affected and that they should be able to obtain cover on the open market.

But politicians representing small market towns and villages hit by repeated flooding decried the Government for caving in to the industry’s demands.

“Small businesses are the ones who need this the most,” said Anne McIntosh, the Conservative MP for Thirsk and Malton and chair of the Commons environment committee. “They are the ones who are hardest hit. I regret this decision immensely.”

The Yorkshire Post has reported how one firm in Calderdale saw its policy excess soar from £500 to £250,000 last year following the disastrous floods which hit Todmorden and Hebden Bridge. Another rose from £250 to £25,000.

Calderdale council leader Tim Swift said the issue was putting companies out of business.

“We’ve had shops and offices devastated,” he said. “The areas hit by floods are the very ones with lots of small businesses – small towns along the valley bottom.”

The “Flood Re” scheme was unveiled by Ministers in June after years of negotiations with the industry over replacing the current informal agreement covering flood-risk areas. From 2015, every household premium will be subjected to a £10.50 levy, to subsidise those most at risk of flooding.

The industry insists premiums will not actually rise, as the subsidy already exists informally under the current arrangement.

The decision to exclude small businesses was confirmed yesterday when the Government published a list of key amendments to its Water Bill, which cleared its second reading in Parliament this week.

The Bill will now be scrutinised by a cross-party committee of MPs before returning to the Commons after Christmas.

John Allan, chair of the Federation of Small Businesses, said he will lobby to have the Bill amended further before it becomes law.

“It is of deep concern that Government has chosen not to include small businesses,” he said.

“If they can’t use this scheme, small businesses in areas at risk of floods will be forced to pay exorbitantly high costs to be insured.”

Defra admitted respondents to a recent consultation had “cited a number of examples of small and medium enterprises experiencing difficulty with the availability and affordability of insurance, owing to risk of flooding”.

Groups including the National Flood Forum, the British Insurance Brokers’ Association and a number of banks and mortgage lenders had all called for small

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