Homes in flood areas 'to be refused insurance'

Homeowners in flood-prone areas will face massive rises in insurance premiums early next year, and some may even be refused insurance, according to a new survey.

Severe flooding has become almost an annual problem in some parts of Britain, and insurers threatened to increase prices after being left with a bill of more than £1bn in 2000.

Then the Government stepped in to guarantee insurance for householders in flood-risk areas by underwriting premiums.

But Elliot Morley, the Environment minister in charge of floods, has now said the guarantee will not be renewed when it runs out at the end of the year, leading insurance companies to say they have no choice but to raise prices.

A survey of insurance companies by Radio 4's Money Box programme yesterday found that many were planning to raise their premiums in the New Year, and some would refuse to insure homes altogether.

Some insurers said they would put up premiums even in areas where flood defences have been built.

But Mr Morley said house-holders would still be able to find reasonably priced insurance if they shopped around.

The Government had been considering a number of schemes, including a tax on homes that are at risk, and a one-off charge to developers building in at-risk areas.