Every home to pay price of floods Hundreds of flood alerts and warnings have been issued in recent weeks after torrential rain swept the country, causing extensive damage to property. Record breaking rainfall in June led the Environment Agency to urge householders to take action to protect their properties and avoid walking or driving through flood waters. Financial experts have warned that thousands of homeowners in areas affected by this summer's floods face higher premiums when they renew their annual home insurance schemes. Some victims of the recent flooding have seen premiums rise by up to five times, while others have been told they must pay the first £5,000 of any future claim. After an estimated £1 billion worth of damage was caused by extensive flooding in 2000, a deal was struck between the Labour government and insurance industry. Insurers agreed to continue to cover the majority of customers living in areas prone to flooding in exchange for government promises to strengthen flood defences. However, this deal is due to expire next year and no replacement scheme has yet been finalised. The Council of Mortgage Lenders has warned that the uncertainty over the future arrangements for insuring homes in flood prone areas was likely to push up premiums. In a statement to MPs yesterday, Mrs Spelman said she was close to reaching a new deal with the insurance industry. Ministers are concerned that some insurance firms are able to "cherry pick" customers in low-risk areas and refuse to offer cover to home owners in flood-prone neighbourhoods. At the same time, customers in high risk parts of the country cannot "shop around" for cheaper policies because they are tied in to their current providers under the existing agreement. The Department for Environment, Food and Rural Affairs said most insurance companies already raise "a small sum" from policy holders to cover the cost of insuring homes at high risk of flooding. Mrs Spelman said she was proposing nothing more than "formalising" the existing "cross-subsidy" and that talks with insurance firms have made "significant progress." "The Government is considering with the industry's support a way of formalising existing pricing arrangements and maintaining the current cross-subsidy in place between policyholders," she told MPs. This would be by means of an internal industry levy, as proposed by insurers themselves. She insisted that the new levy would "avoid increasing costs for those not at risk" while helping families in danger areas to afford insurance. "The Government and insurers are determined to see insurance premiums remain affordable and widely available, particularly in light of the pressure household budgets are currently under and the pattern of flood events we have seen over recent years," she said. The government is also spending more than £2.1 billion on flood risk measures and will is ensuring that 145,000 more homes are better protected from flooding. Mary Creagh, Labour's Shadow Environment Secretary, said Mrs Spelman should have acted sooner. "The statement does not do anything for home owners and businesses who are struggling to find flood insurance," she said. One insurance industry expert, Ashwin Mistry, accused the Government of introducing a "stealth tax" instead of dealing with the underlying issue of poor flood defences. The chairman of Brokerbility, a network of independent insurance brokers, said topping up the insurance of flood-hit households is simply "papering over the cracks." "Should we be subsidising all those in flood zones continuously rather than dealing with the long-term problem?" he said. The extra cost would range from anything from £10 to £20 more per policy on top of everything else. It's another tax by stealth, rather than addressing the critical issue of climate change and better infrastructure. Rivers burst their banks in Sidmouth, Devon, last week as residents in the South West were warned to protect their homes. In Hebden Bridge, West Yorkshire, rising flood waters have overwhelmed the streets, causing extensive damage for a second time in two weeks. Police told residents to stay at home upstairs if possible. Ian Crowder, from AA Insurance, said it was inevitable that people would have to pay more for their home insurance because flooding is getting more unpredictable. "Nobody likes paying more money and you could argue those sensible enough to choose houses away from flood plains will say why should I have to pay?" he said. On the other hand, this is how it works in almost every other country. The UK is unique around the world in that home insurance includes flood cover as standard. He said insurance companies are already preparing to withdraw cover from houses in the worst-affected areas from the middle of next year. Unless the government can strike a deal with insurers, they will be left without insurance. According to the AA, the average household pays £176 in building insurance every year. It rose 7 per cent over the last year and by 12 per cent the year before. Nick Starling, Director of General Insurance at the Association of British Insurers, said: "Insurers continue to provide cover for flooding as a standard part of UK home and small business insurance and we remain committed to doing our very best to help those that suffer the devastation flooding brings." Wednesday, forecasters warned of more flooding in parts of Britain after nearly a month's rain fell in just three hours. Thunderstorms and persistent showers affected the south coast of England and the Environment Agency warned areas of Dorset and Kent could be at particular risk. Five flood warnings were in place, in the South West and the Midlands, and there were 23 flood alerts across the country.