Insurers "should reward" flood proofing Rescue services navigate flood waters after the River Wansbeck broke its banks in Morpeth, England, Tuesday, Sept. 25, 2012 as communities work to rescue stranded residents from their homes, after heavy rain caused flash floods across parts of the United Kingdom. People have been evacuated from their homes and flooding has caused major disruption to transport after parts of the UK were battered with more heavy rain. The chairman of the Environment Agency has launched a broadside at insurers for their "peculiar" reluctance to help ease the growing threat of flood damage to thousands of homes and businesses. The industry should take a leaf out of its own book and offer cheaper premiums to people who made an effort to flood-proof their homes, said Lord Smith of Finsbury. In addition, instead of simply restoring flooded properties to their previous state, insurers could have a significant impact on minimising future water damage if they spent as little as 1 per cent more by doing things such as raising the height of electrical sockets and covering air bricks, he said. "I've tried to persuade the insurers they should fund to make properties more resilient rather than simply restore what was there before," he told the Financial Times in an interview. They've been for some peculiar reason very reluctant to do that and very reluctant to reflect resilience in the premium that they charge to people. Lord Smith said he had first raised the idea of linking premium rates to flood-proofing with the Association of British Insurers, the industry's main trade body, at least three years ago. "They said to me at a meeting, "You have to realise we are in the business of assessing risk not diminishing risk," and actually I think for their own interests they ought to be encouraging the diminishing of risk," he said. The ABI said it was surprised at Lord Smith's comments because it had recently worked with the Environment Agency to produce a standard flood risk property report that insurers could consider when assessing coverage terms. "It is in insurers" interests to reflect risk as accurately as possible in the premiums they charge," said Nick Starling, ABI director of general insurance. This is why we have worked to develop an industry-recognised template for homeowners to tell their insurer about property level defence measures. Lord Smith said that was a step in the right direction but more could and should be done. The point I made to them was, look if someone puts window locks on their windows, you take that into account when you judge how much at risk they are of being burgled. If someone takes steps to make sure that if their property is flooded then there is likely to be minimum damage and restitution is going to be quick, perhaps they ought to take that into account as well. Cheaper premiums could be offered for precautions such as air brick covers; safe electrical plug heights; door guards and taking steps to ensure flooring did not get damaged by flood water, he said. Separately, the ABI is still in protracted talks with the government on a new flood insurance deal to protect properties in high-risk areas. An agreement forged in 2008 requires insurers to cover such properties while the government improves flood defences but that is due to expire in June [2013]. Talks have stalled, despite insurers" warnings that as many as 200,000 homes would struggle to get affordable insurance unless a deal was struck.