Households may be left without flood insurance

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The Prime Minister faced a row with insurers last night over threats to leave many households without insurance because of the failure to invest more public money in flood defences.

After this summer's damaging floods, the insurance industry warned that bills would rise. But yesterday it accused the Government of letting down millions of homeowners and businesses by failing to meet their demands to spend £2.25bn on flood defences over the next three years.

The Chancellor, Alistair Darling, announced on Tuesday that spending between 2008-2009 and 2010-2011 would total £2.15bn, an increase of £800m.

Gordon Brown told MPs in the Commons that differences with the industry over spending were "very small" and that the Government was doing everything it could to improve flood defences. "I hope they [insurance companies] will not take the step to deny people insurance," he said.

Under the insurance industry's current Statement of Principles on Flood Insurance, insurers have agreed to continue to renew flood cover for existing customers, provided adequate flood defences are in place. They will also renew cover for people in high-risk areas if there are plans to build or improve flood defences in the next five years.

However, some householders are furious that although their homes are being repaired with insurance money, there is no sign of any improvement in the flood defences. They fear that they could be exposed to more flooding as a result of climate change but, next time the floodwaters hit, they may not be covered by their insurance.

The Government has acknowledged that it will take some years for the necessary flood-defence improvements to be put in place.

But Hilary Benn, the Environment Secretary, said yesterday: "The £800m that I announced to the House of Commons on 2 July followed a call from the Association of British Insurers in June of this year for us to get to £750m. So we actually announced more than the ABI was calling for at the time. The really important task is to get on with spending that."

During Prime Minister's Questions yesterday, David Blunkett, the former home secretary, attacked the insurance industry, saying: "It will lead people to conclude that the industry wishes to remove any commercial risk to their own profits and place that risk instead on current and future policy holders."