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Wednesday, 12 June, 2002, 12:46 GMT 13:46 UK
UK insurer to halt flood cover
Sandbags were used to hold back the River Ouse
Parts of the UK were severely flooded in 2000
Internet insurance firm Esure is to stop offering household cover to people living in areas prone to flooding.

Esure claims the policy will save its policy holders about 30 a year on their premiums.

Britain was hit by severe floods in the winter of 2000, with a clean-up operation costing more than 1bn.

Heavy rains caused further flooding the following winter and early this year in parts of Britain.

The British government has warned global warming makes heavy rains and flooding more likely.

Policy on hold

Esure's change of policy breaks ranks with the rest of the UK insurance industry, which has agreed a two-year moratorium on whether to provide flood cover to homes and small businesses.

The moratorium runs until the end of 2002.

Esure says only 10% of households face a significant risk of repeated flooding but providing cover for them puts up the cost of most household insurance premiums by 5-10%.

The firm argues that the government is failing to keep its side of a 1961 deal with the insurance industry under which the government pledged to maintain flood controls if the industry provided on household flood cover.

'Government failure'

"Esure is entirely sympathetic to homeowners who live in flood risk areas or on flood plains, but they have been let down badly by years of government failure to improve the UK's flood funding, planning and defences," chief executive Peter Graham said.

"We believe that the dry majority is now being unfairly penalised through their high home insurance premiums on account of the failure to address the problems facing houses built in flood risk areas."

Esure spokesman Adrian Webb told BBC Radio Five Live's Financial World Tonight programme: "The government is underfunding flood defences by 150m a year."

Roz Amor, whose home near the River Ouse in Yorkshire was badly flooded in 2000, objected: "It should be an even playing field. We all pay for each others' insurances."

Concern

And Mary Dhonau, of the campaign group Worcester Action Against Flooding, is worried about the effect on other insurance companies.

"I am very concerned that others will jump on the band wagon," she said.

Esure says it hopes its stance will help force the government to tackle the underfunding of flood defences.

"By doing this we're going to highlight the issue," said Mr Webb.

The firm said it plans to join forces with other insurers to call on the government to boost spending on flood protection.

Esure said its change of policy would be introduced immediately.

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The BBC's Ben McCarthy
"The fear is that it may become impossible for some homes to get any insurance against flooding"
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