Left high and dry by an end to flood cover

THE insurance industry has delivered a stark warning to the government that unless it spends billions of pounds on flood defences over the next few years, consumers will be abandoned to the mercy of the winds and rain, unable to buy cover.

Without insurance protection, homes are unmortgageable, unsaleable and ultimately worthless. As the industry counts the £3bn cost of the latest downpours, thousands of households are likely to receive eye-watering renewal quotations, which serve as effective blight notices on their properties.

The Association of British Insurers has written to Environment Secretary Hilary Benn threatening to withdraw cover unless significantly more is spent preventing future trauma for families and heavy losses for companies.

It blames government mismanagement rather than climate change for much of the recent catastrophes and claims they could have been prevented with more investment in replacing antiquated drains and poor flood defences. It also blamed massive building on flood plains as a major culprit.

For the first time, the industry body made clear its intention to halt its losses by threatening to withdraw insurance from properties in high-risk areas unless the government spends £8bn on sea defences over the next 25 years; blocked drains and watercourses are adequately maintained; and all building on flood plains ceases until flood defences are installed.

ABI spokesman Malcolm Tarling said: "Climate does play a part in our recent severe weather. But in Hull, for example, most of the flooding came up from the drains. Antiquated and poorly managed drains was the problem."

A bigger headache still will be new homes built on flood plains. The ABI gave a clear signal that the industry will not insure such homes unless adequate defences are put in place, which will leave them unmortgageable and worthless.

HBOS spokesman Mark Hemmingway said: "We know that insurers will always do everything they can to make sure households are properly protected. But the bottom line is you need insurance to get a mortgage. We will not lend on an uninsured building."

Homebuyers are advised to think carefully about a property's flood risk before proceeding with an offer.

Esure's Adrian Webb said: "When you are looking at a property, the very first thing you should do is check the flood map for the area. If it is at risk and there are no flood protections in place you should think carefully about going further."

In the light of January's storms and recent flooding, insurers will carefully scrutinise all applications for household insurance, with those at risk of flooding being charged a premium. Properties which have already been flooded could see big increases in their insurance costs.

Defacto's Brian Brown said: "Premiums will go up, but so too will excesses, which is the amount the policyholder pays before the cover kicks in. There are already rumours circulating of customers being asked to agree to £30,000 and £40,000 excesses."

Before long, though, anyone who has experienced flooding will find cover unavailable at any price.

Brown added: "You only have to do the sums. The average flood claim is £30,000. If you have three of those over a period of years, you have cost your insurer nearly £100,000. No one is going to be eager for that business."

Norwich Union has announced premium increases of 10% across the board, but the expectation is that those in high-risk areas will bear the brunt.

So if your household insurance policy knocks the wind out of your sails when the renewal notice drops on your doorstep, what should you do? Scotland on Sunday reveals 20 tips to help you cut your premiums:

Do everything you can to avoid claims by paying careful attention to security measures, fire risks and flood prevention.

Do not over-insure. Know the difference between the rebuild cost of your home and its value. The rebuild cost will usually be lower.

Draw up an inventory of all your home contents so that you know the precise value of your possessions.

Know your flood risk. Check your home on the Scottish Environment Protection Agency flood map.

If the flood risk is low

Shop around. It sounds obvious, but far fewer consumers shop around for their household insurance than for their motor cover. This has never been easier, thanks to the money supermarkets on the internet such as PeoplesChampion.com, GoCompare.com and Moneysupermarket.com.

Buy over the internet. Companies such as Direct Line and Esure give up to 15% discounts for buying online.

Install security devices. Good locks, a burglar alarm and membership of a neighbourhood watch scheme can all cut your costs.

Install smoke detectors throughout the property.

Consider accepting a higher excess. Increasing your excess to £200 can cut 5% off the premium.

If your home is at risk

If your property is in an at-risk area with no flood defences, you might even consider moving while you can. If you wait until the worst happens, you will suffer the trauma of flooding but then may see your insurance go through the roof and experience difficulties moving.

Study local flood warning news carefully, and act early on their advice.

Organise your home so that valuables can be easily moved upstairs at any hint of trouble.

If you've been flooded before

You could find yourself with a painful renewal premium, plus excesses which make you wonder why you are insuring at all. It is still worth shopping around, but it may be difficult or impossible to move to a new insurer.

The good news is your insurer will continue to provide cover except in the most catastrophic cases. So your only option may be to stay with him.

If you still feel you are being unfairly penalised, try negotiating. Find some evidence which proves that the circumstances which triggered the claim will not be repeated.

Still saddled with a huge excess? Then you have no alternative but to insure yourself, by flood-proofing your home.

Modern flood prevention methods are available from specialist flood prevention companies which can be contacted via the website for the Flood Protection Association and the National Flood Forum. These include UPVC flood guards.

Consider replacing ground-floor wooden boards with a concrete floor. Plasterboard walls should be replaced with breeze-blocks skimmed in concrete. Electric plug sockets should be set higher up walls.

Buy solid wooden furniture which dries out rather than MDF, which is ruined by a dousing.

Lobby your MSP to secure flood defences which will make your home insurable and saleable again.