World Insurance Report

What insurers can do to reduce flood risks

The assistance provided by insurers in the UK to those at risk of flooding is a vital one, demonstrated very clearly in 2007 when they had to deal with over 180,000 claims, equivalent to four years of normal claims totals. 17,000 households were housed in alternative accommodation by insurers. Indeed, Sir Michael Pitt, in his review of the floods, very clearly recognised that industry played a major role in helping the country to recover from the floods. However, Lord Chris Smith, chairman of the Environment Agency, believes that the industry can do more in terms of providing financial incentives (which the government cannot provide) that can help to change the way people respond to the dangers they face. In a recent speech to a London Insurance Institute seminar, Lord Smith noted that in the 18th century, the London insurance industry was able to take the lead in providing incentives for people to reduce their fire risk, by introducing the first building fire codes in the form of fire marks. In this edited extract from that speech, Lord Smith urged the industry to consider taking the same approach, for flood risk in particular, but also for some of the wider challenges we face as a result of climate change. He also called on insurers to rebuild flood-hit properties to more resistant and resilient standards

At present there are over 5.5 million people in England and Wales at risk from flooding from rivers and the sea and over 2.9 million properties at risk from flooding from surface water – that’s 1 in 6 people at some risk of flooding. The spread is of course not an even one across the country. In relation to fluvial flood risk, we know by and large the areas of risk; but the people likely to be affected need themselves to know who they are as well. For surface water flooding, our knowledge is more incomplete, but we are working closely with local authorities to improve the quality of information we have.

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