Last week I concluded an article on the huge difficulties facing insurers as the row about the future of flood insurance intensifies with a challenge: "It will then be over to the insurance industry to explain what has happened and prepare people for the consequences. I hope it is ready."
This morning's media coverage following a weekend of flooding across the UK shows that the industry has more than risen to that challenge.
The Association of British Insurers has come out fighting and seems to have got the media on its side. It has been forthright and honest about where the negotiations have got to:
"The Government has indicated it will not provide any temporary overdraft facility for the insurance industry's not for profit scheme, which makes it very difficult for it to go ahead. As a result, negotiations have hit an impasse. Insurers know their customers are increasingly worried about flood cover and we will therefore continue talks with Government to try and find a way forward.
"The severe floods experienced by many areas of the UK this year are a reminder of the rising flood risk facing the UK. It is therefore vital that insurers and Government tackle this issue together - this is not just a problem for insurers. No country in the world has a free market for flood insurance with high levels of affordable cover without some form of Government involvement."
This is a bold move by the ABI as government departments don't usually take too kindly to the details of negotiations being made public and the Environment Minister Richard Benyon was quickly pushed onto Radio 4 this morning to defend the position of the Department of the Environment, Food and Rural Affairs (DEFRA).
He didn't do a very good job and just ended up lashing out at insurers for negotiating in public by saying their approach was "demeaning". He failed to explain why DEFRA has not lived up to the promise in made in June that an announcement of a new, better scheme was imminent. We all know why: it forgot to ask the Treasury if it minded carrying the risk of underwriting a pooled flood insurance scheme. That is a schoolboy error in the world of Whitehall politics and now hundreds of thousands of householders are going to pay the price.
The ball is firmly in the government's court. It could sanction a massive increase in spending on flood defences which would certainly wrong-foot the insurance industry but is extremely unlikely. Or, it can back 'Flood Re' as the insurer of last resort, overdraft provider or however you want to dress it up. Either that or risk losing thousands of votes in flood-prone constituencies. Over to you DEFRA.
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