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Insurers show no appetite for changing riot compensation rules

Insurers have urged caution over calls to revamp the 1886 Riot Damages Act - and they are probably right to do so.

At yesterday's meeting of the All Party Parliamentary Group on Insurance & Financial Services Nick Starling, director of general insurance and health at the Association of British Insurers, praised the late 19th legislators who created the Act: "The Riot Damages Act is still fit for purpose...and we think there is a very strong case for retaining it". He said that the definitions had proved sound and warned that more could be lost than gained by changing them.

london-riot-tottenham.jpgIn a briefing submitted to MPs, the ABI further emphasised what it sees as the core purpose of the Act: "We believe that, just as victims of crime can be compensated under the Criminal injuries Compensation Scheme, victims of the recent riots should also be afforded compensation for their losses", adding that householders and businesses that were not fully insured still deserved to be compensated for damage caused by "acts of violence and looting which were no fault of their own".

The ABI also warned that without the safety net of the compensation scheme under the Act insurers would be forced into making some potentially very harsh assessments of the risk of rioting in some areas. The implicit suggestion - even threat - here is that it could lead to red-lining of some inner city areas and the insurance industry knows from bitter experience in the past that it will be the only loser if that debate flares up.
These all seem to be sound points but they do not tell the whole story about the Riot Damages Act. It does have its short-comings and, as Lord Sheikh told the meeting, it does need to be re-vamped. The trick will be to retain the core purpose, scope and relative clarity of the Act while making it better suited to the 21st century.

 A range of issues were highlighted that deserve consideration if the Act is to be up-dated.

Bill Gloyn, chairman of the British Property Federation Insurance Committee, proposed the creation a National Reinsurance Fund so that there would be no doubt that the government would pay when riots occurred and wouldn't leave the police authorities to lobby over picking up the unbudgeted bills. This suggestion was immediately christened "Riot Re" by the group's chairman, Jonathan Evans.

The suggestion has some merit because one of the dafter aspects of the summer's riots was the almost obsessive way government ministers and spokesmen steered away from using the R word for fear of triggering the statutory compensation. This was despite the Home Office apparently telling the ABI on the Tuesday at the height of the disturbances that they were clearly riots under the definitions in the Act. A proper national scheme would also deal with one of the problems highlighted by Graeme Trudgill of the British Insurance Brokers' Association, which is the frequent confusion over which police authority claims should be submitted to.

Speaking from a loss adjusting perspective, Cunningham Lindsey's Jonathan Clark, highlighted some of the old-fashioned features of the Act that definitely need an overhaul, especially the long and cumbersome forms, not to mention the references to £ s d (pre-decimal currency) and guineas.

He also called for the notification period to be permanently extended from the 14 days in the Act and beyond the 42 days announced by the Prime Ministers when Parliament was recalled in the summer: "Even 42 days is too short for major losses ... Lloyd's typically allows 90 days".

All of this seems to be a sensible case for a modernisation of the Act rather than a wholesale repeal and reform. Hopefully, this can be achieved within a timetable that gives plenty of time to ensure it is done properly and then put safely away for a good few years before we find ourselves dusting it down again. 

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