As Canadians still search for a viable national overland flood strategy, the British model has come under fire as a wasteful tax by critics.
The government scheme to make home insurance affordable for families in areas at risk of flooding is wasting householders’ money, say advisers, as it subsidizes insurance premiums for homes on flood plains through a £180 million tax on everyone else’s home insurance.
But the Committee on Climate Change (CCC) says the costs of the scheme are three times greater than its benefits.
“Flood Re is set to subsidize many hundreds of thousands of households more than the estimated number that might struggle to afford cover in the free market,” the chair of the CCC’s adaptation sub-committee, Sir John Krebs, told
BBC News. “This makes Flood Re needlessly expensive.”
He called for the scheme to be slimmed down and its emphasis changed.
“Managing flood risk will always be the best way of securing affordable insurance in the long term,” he said. “A transition should be achieved by helping high-risk homes become more resilient.
Sir Krebs told the
BBC that there is a risk that Flood Re will be counter-productive to the long-term management of flood risk in the U.K., as it largely removes the financial incentive for households to take steps to avoid being flooded.
The Department for Environment, Food and Rural Affairs has gone on record stating that Flood Re made insurance available and affordable.
The CCC, an independent body set up to advise the government, is calling for the tax on everyone's premiums to be reduced.
In addition, cash should help prevent flood damage rather than be paid to people to clean up after a flood, it says.
An estimated half a million homes will have their insurance capped under the plan, but the committee says the insurance industry calculates that only 200,000 of these recipients would genuinely struggle to afford insurance without the support.
It says the cost of the scheme, known as Flood Re, breaks normal government spending rules because it offers negative value for money.
Flood Re was set up in June 2013 by ministers in collaboration with the Association of British Insurers (ABI).
It was designed to be not-for-profit but the CCC says in fact insurers benefit from it because their own risk has been reduced.
