Clouds gather over flood insurance premiums

Thousands of property owners will find out before Easter whether their insurance premiums are likely to increase dramatically because their homes are prone to flooding.

The Environment Agency now says it will publish its latest flood defence strategy within two weeks. It will also produce an updated version of its national flood map on 4 April, showing every single property in Britain it now deems vulnerable to flooding.

When the agency first began updating its maps, last October, it warned that 2.2 million homes were at risk, 300,000 more than previously estimated. The latest maps are not expected to produce such dramatic results, but premiums could still be affected.

Malcolm Tarling, of the Association of British Insurers (ABI), said: "In the vast majority of cases, insurance will still be available, though we are concerned about the number of new properties that are being built on flood plains; 50,000 at-risk homes are planned for the South-east alone."

The Government last year brokered a deal with insurers, which agreed to continue offering cover to existing clients in at-risk areas as long as public spending on flood defences was increased. However, the cost of home insurance has already increased by between 10 and 20 per cent a year over the past five years, following a sharp rise in the number of claims related to bad weather. ABI members paid out £6 billion in weather-related claims between 1998 and 2003, twice as much as in the previous five years.

Richard Mason, director of independent analyst Insuresupermarket, said policyholders in many areas of the country would need to find insurers with specialist flood expertise in order to reduce costs.

"Some insurers are adopting more sophisticated measures of assessing risk," Mason said. "You could save an average of £110 a year by switching to a better deal, even if you live in a flood-risk area."

Insurer More Than will next week unveil its flood map technology, one of few systems able to set premiums based on individual homes, rather than all the properties in a postcode.

Norwich Union is the only other insurer that tailors premiums to individual properties. When NU launched its property-specific flood map last year, it found it was able to offer cover to 600,000 homes that it might previously have rejected.