Scots subsidising insurance premiums for English flood plains properties


    At present there is a “stealth subsidy” of over £200m per year from policy holders in low-risk areas in Scotland to those in high-risk areas in the southeast of England to enable continued flood plain property development.  Scots with their lower flood risk are paying a disproportionate share of this.

    This “stealth subsidy” is being imposed on Scottish families and businesses because the insurance industry has promised to provide affordable flood insurance for every UK home and small business – those in low-risk parts of Scotland are being made to pay more to subsidise those in high-risk areas which is patently unfair to Scotland which has taken and is taking measures to reduce the likelihood of flooding.

    Nearly a quarter of homes in England are at risk of flooding, compared to less than 5% in Scotland.  This difference is due to a lack of available space to build on, resulting in over 10% of new properties in England being built in flood-risk areas – a practice that hasn’t been allowed in Scotland and Wales for a number of years.

    Experts say England’s flood management efforts have been “largely unsuccessful” – there were now a minimum of 40 ways in which Scotland’s flood risk was significantly lower than the rest of the UK.

    David Crichton, leading flood insurance expert, who has advised many Scottish local authorities on flood insurance, said: “Scotland has gone a long way to manage the risk. The trouble is that most insurers are unaware that there is any difference at all.”

    Flood insurance is a reserved matter for Westminster, but Mr Chrichton asks Scottish ministers to speak to the insurance industry and explain the flood policy risk differences in Scotland compared to England, saying : “Ministers could also demand that the insurance industry no longer force Scots to subsidise London property developers.”

    Mr Chrichton believes this “stealth subsidy” situation was becoming “unsustainable”, he said: “A few of the cleverer insurers have realised that they can easily undercut the premiums in low-risk areas such as Scotland.”

    However, even though Scotland is better managing its flood risk areas than England, there is an ever increasing risk of flooding due to climate change in Scotland – average rainfall in the west of Scotland rose by 50% between 1961 and 2004, and 2011 was the wettest ever on record. 

    According to Dr Richard Dixon, director of WWF Scotland: “Although we have become much better at stopping people building in really stupid places, climate change means that more existing properties will start to be at risk from flooding. There are plenty of properties at risk of flooding in Scotland and those risks are increasing.”

    Alarmingly for those with properties in high flood risk areas, the current 51-year-old agreement between insurance companies and the UK Government to guarantee flood insurance for all is due to end in 2013 and will likely be replaced by a new “hard-line” policy from insurance companies – the premium costs for homes at high risk of flooding are likely to skyrocket in 2013. 

    In the coming 12 months, people in Scotland who live in flood risk areas may well be shocked by increases in the household or business insurance premium – Scots in high-risk areas could see insurance premiums jump as much as 70%, and some properties at high risk of flooding may become uninsurable – there are currently over 125,000 properties at risk of flooding in Scotland i.e. one in every 22 homes and one in every 13 business premises.

    The Scottish Environment Protection Agency (Sepa) says there are currently 243 areas of Scotland at risk of flooding – i.e. much of the central belt, large areas in the south and north and large parts of the islands, usually near rivers or the sea.