Examination of Witnesses (Questions 416
- 419)
WEDNESDAY 28 NOVEMBER 2007
MR STEPHEN
HADDRILL, MR
IGAL MAYER
AND MRS
BRIDGET MCINTYRE
Q416 Chairman:
Good afternoon ladies and gentlemen. My apologies for the slightly
late start this afternoon to our further evidence session on the
Committee's inquiry into flooding. Just a little bit of housekeeping
before we begin. Somewhere between four and possibly four-thirty
the division bell will go, the Committee will be adjourned whilst
we go and vote and I would hope colleagues would be able to turn
round and get back within ten minutes to continue our session.
If the bell goes, that is what that is all about. We are delighted
to see so many people here this afternoon and at the fact that,
once again, we are being televised. This inquiry is rapidly becoming
cult viewing. People are riveted by everything that you say, so
this could be your moment for stardom! Those who are going to
be subjected to this process formally, on behalf of the Association
of British Insurers, Mr Stephen Haddrill, their Director-General,
from the Norwich Union Company Mr Igal Mayer, their Chief Executive,
and from Royal and SunAlliance, Mrs Bridget McIntyre, who is their
UK Chief Executive. You are all very welcome and thank you for
the written evidence which you have put before the Committee.
One of the things that intrigues us is that in the United Kingdom,
I will not say uniquely in Europe, but, unusually, you as representatives
of the insurance industry are prepared to cover the risks associated
with flooding, whereas in other major European countries they
are not. Why do you do it?
Mr Haddrill: Shall I kick off
with that and then my colleagues can follow on? Firstly, I think
that we have got a good arrangement with the Government that produces
a win-win, providing it continues, because the British Government
has committed to increasing levels of flood defence expenditure
and that enables the insurance industry to provide cover at a
reasonable price, to make it available to quite a high proportion
of the market and, as a result of that, you have got people taking
personal responsibility, if you like, for the risk and not falling
back on the taxpayer when a flood happens. So I think you have
a virtuous circle in the UK that we want to see continue. One
alternative, for instance, in France and in Spain, and so on,
is the idea of compulsory insurance, which, frankly, does not
work. The take-up, even though the insurance is supposed to be
compulsory, is often lower than it is in the UK and, of course,
it is only achieved with the state actually backing the risk,
in effect, being the re-insurer. So, from that point of view,
the alternative seems to produce a worse result for their countries
than a voluntary system does for the UK.
Q417 Chairman:
What about the situation for people who, for all kinds of reasons,
do not insure? Sometimes their personal priorities mean they spend
their money on other things than insurance products, but sometimes
they just may just plain not be able to afford it. If we are in
a situation of climate change, more extreme weather events, one
could conjecture that more people might be affected by flood situations
and, therefore, what do we do about it? Should you have a complete
re-look at the way the risk is covered or just accept that you
are going to have two classes of individual?
Mr Haddrill: At the moment we
have a very high proportion of home owners covered. About 90 per
cent of people who need cover on the buildings are actually covered.
The figure is a bit lower for contents. It is about 75 per cent
. So the class that is covered is actually a large proportion
of the population. There is a proportion of the population who
probably do not feel they can afford it, or do not really understand
it, and there our answer has been that we need to find better
ways of getting access to those people, of encouraging them and
of enabling them to pay, and that is why we have always supported,
and my colleagues on the left here have very much supported practically
on the ground, the "insurance with rent" scheme in the
social housing sector.
Q418 Chairman:
Have you designed any products which, if you like, are solely
flood risk products as opposed to being part of a more comprehensive
household policy?
Mrs McIntyre: Currently no, we
have not. It is interesting, because I am chairing the Social
Inclusion Workforce that is looking at insurance and insurance
with rents and looking at how we can widen the offering, and we
are looking at insurance that is about £1.50 a week—that
is the kind of cost of the insurance. So, when you look at the
total cost of £1.50 a week, if you were starting to have
a product that was purely flood risk, it would start to not work
in terms of probably the economics, and the £1.50 to cover
everything for all eventualities, I feel it kind of works better.
Q419 Chairman:
I would not mind household insurance for £1.50 a week. Can
I come and see you afterwards. It sounds a very good deal.
Mrs McIntyre: It is a very simple
product.
|
