‘Small firms stranded on flood insurance’

"We must make it viable for affordable cover to be available  to all"

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The Independent Online

MPs will today call on the Government to develop cheaper and easy-to-obtainmore accessible flood insurance for small firms. 

Craig Whittaker, the Conservative backbenchMP for Calder Valley in West Yorkshire, which was devastated by the winter floods, told The Independent that many of the localbusinesses in his constituency have been devastated because they couldn’t obtain adequate insurance.  by the lack of insurance they could obtain.For example, a furniture manufacturer could only get cover for stock, so it is struggling to afford toreplace £600,000 worth of damaged equipment and cannot fulfil its fullorder book. 

The Government is introducing a new scheme, Flood Re, to help provide affordable cover for homeowners, and this will start in April. It replaces an existing industry agreement known as the Statement of Principles – but, unlike its predecessor, it does not include small firms. 

Oliver Letwin, MP, an adviser to David Cameron’s top trouble shooter, did look into creating a scheme specifically for small businesses, but privately ruled it out last year after he was advised this would do little to reduce premiums. 

Mr Whittaker believes, though, that a  scheme dedicated to small businesses still needs to be introduced, though, givenwith the Federation of Small Businesses finding last year that 75,000 firms in or near flood plains struggled to get insurance and a further 50,000 were refused cover outright. 

He said a solution being developed by the British Insurance Brokers Association was “a step in the right direction” but was concerned that the body cannot guarantee it will be affordable so “doesn’t go far enough”. 

“I’m calling on the Government to make it viable for affordable cover to be available to all,” said Mr Whittaker. “Government will have to work with industry to create a partnership model.” 

It is understood that the insurance industry has started discussions with Mr Letwin about the issue, which has concerned many MPs whose constituencies were flooded. 

In particular, insurers are keen for the Government to improve flood defences because this will mean the risk of damage decreases and, in turn, brings down the cost of cover. 

Tim Farron, the Liberal Democrat leader who was briefly stranded when Cumbria was flooded in December, has argued that insurance is still too expensive for his poorest constituents. PricewaterhouseCoopers, the Big Four accountancy firm, has estimated that the damage to the Cumbrian economy could be as much as £500m.