Craig Whittaker: Flood insurance limbo brings a tide of despair

As welcome as the Government response has been to date, there is still far more to do. The communities in my constituency will need a great deal of support over the coming months and years as they get back on their feet.

The Environment Agency is due to complete the long-awaited flood prevention modelling work for the length of the Calder Valley in October. Although improved flood defences and upland management schemes cannot guarantee full protection in the future, there is an urgent need to move ahead with such projects.

There is also the need to work with businesses to ensure that they are able to recover. An essential part of that is ensuring that small businesses are able to access flood insurance.

In response to a recent written question on this issue, the Flooding Minister, Rory Stewart, said: “While we recognise the difficult challenges that some small businesses could face in accessing commercial flood insurance in areas of high flood risk, we are not currently aware of evidence that there is a systemic problem. Therefore, we have committed to work with the Association of British Insurers (ABI) and other interested parties to monitor the insurance market for small businesses.”

Although the ABI said that it would not turn down any small business for flood insurance, I can confirm that, having spoken to hundreds of businesses in the Calder Valley, 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 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.

However, a more detailed consideration of the basis on which the evidence has been collected, provides a different picture. The headline figures 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 contains only small numbers of businesses located in high flood-risk areas. As such, one may question how valuable such data is.

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 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.

Calderdale Council says that between 40 and 50 per cent 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 per cent 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.

I will cite just three of the many examples coming in daily to illustrate some concerns. The first is a leading high-end British furniture manufacturer located in Mytholmroyd. Its insurance cover was due for renewal only last week and it has been told that it will not be able to access flood cover again, even for stock.

At the other end of the Calder Valley, in Brighouse, is a nationally acclaimed climbing centre which opened in 2011 and now has over 30,000 members. Together with its sister business, a bar and a restaurant, it employees 30 local people and occupies a strategic site that is central to the regeneration of the wider area. As the business is located between the river and the canal, it has been unable to access any flood insurance since it was set up. The business incurred losses when it was flooded in 2012 and now, following the latest floods, it faces a very substantial bill and a battle to stay in business.

Last but by no means least, I will mention a large manufacturing firm which has been flooded on four separate occasions over the past decade. The difficulties in accessing insurance, and the losses incurred by being flooded so regularly, now mean that it is likely that this business will close, with the loss of 40 jobs.

Although I am encouraged by the words of the Prime Minister and his assurances that he is looking very closely at this issue, my experience leads me to believe that there are potentially hundreds of businesses in my constituency which are unable to access flood insurance.

With Flood Re, which is for domestic properties, the Government has shown that it is possible to work with the insurance industry to create a scheme that can fill the gaps in the existing market.

They are currently talking with the Association of British Insurers about business insurance. The ABI feels that it is the Government’s responsibility to fix this issue, while the Government, I am sure, feel it is for the market to fix it. However, I suspect the solution is somewhere in the middle with a joint partnership between both.

Craig Whittaker is the Conservative MP for Calder Valley who led a House of Commons debate on flood insurance. This is an edited version.