Tuesday, 17 December 2013
Topical Issue Debate
Flood Risk Insurance Cover
I thank the Minister of State, Deputy Brian Hayes, for being here to discuss again this issue of insurance companies' non-engagement with areas of the country, particularly in the city and my constituency, where householders have undergone much hassle, discomfort and, in some circumstances, displacement because of the irregularity of weather patterns over the past number of years. There have been quite a number of severe weather events over the past and this has caused considerable distress to areas across the city. What has caused even more distress, as the Minister of State will be aware, as he has been quite to the forefront in this discussion with me previously, is the non-engagement of insurance companies with these individuals.
What we have done, in Dublin City Council, based on the Scottish model, is establish a flood forum. The flood forum goes to local areas, deals with the particulars of the areas on an individual basis, gives advice - more than any financial support - to individual householders and talks about what could be done, what could be changed and what could be applied for. We learned yesterday at a Dublin City Council meeting, however, that when the flood forum was trying to engage with the insurance companies, it was being stonewalled. The insurance companies have no interest in engaging with them. As a result, individuals, through no fault of their own are, due to extreme circumstances, house location etc., losing their house insurance. If one has no house insurance, one cannot sell one's house and it is worthless because no prospective buyer can get a mortgage without house insurance. What we have here is a small number of individuals who are living in worthless homes because of the inability of the local authority or whoever to engage with the insurance companies who are not taking this issue seriously.
It is crucially important for this small number of individuals that this be resolved. It is also crucially important, as the Minister of State will be aware, for areas like Maryfield Crescent in respect of which the local authority, through every strategic policy committee and every area committee, has accepted that €50,000 should be spent on hydraulic analysis yet city councillors are not willing to spend the money to find out the problem in order that we can rectify it, go forward and not have this issue hanging over our heads in the long term.
However, the main issue is that when we establish the flood forum, we ask residents to engage with it - residents can be justifiably untrusting of any new forum that is set up if they think it is a committee or talking shop that will not have any real effect. If the forum engages with residents on the issues concerned, a level of expectation is raised and the residents think that perhaps some solutions can be found to put this issue behind them, and then the flood forum goes off and tries to engage with an insurance company and does not get anywhere. We ask citizens to engage with the process, to believe in their local authority, to understand that the OPW has a certain responsibility here as well, to talk about the issues concerned and to trust in the agents of the State so that they can finally find a long-term solution, but when that flood forum, which is an agent of Dublin City Council, goes to talks to an insurance company, there is non-engagement. As a result, there is the problem of individuals with homes that are effectively worthless.
I would be interested in getting an update on the Minister of State's interaction with the insurance companies and the insurance federation. It is only reasonable that a request would be made, through the flood forum. Dublin City Council or any local authority should be able to provide proof to the insurance company of works undertaken. That should be enough for the insurance companies. The householder should be able to get on with his or her life, and not have the matter constantly hanging over his or her head. It is so serious that every time there is a black cloud residents get nervous, start worrying and think there will be a major weather event that will impact seriously on their lives again. They cannot move on; they are stuck. I ask the Minister of State to update the House and myself on his engagement with the insurance federation and individual insurance companies.
I thank Deputy Ó Ríordáin who, once again, has raised this important issue on behalf of constituents. I fully appreciate his frustration at the lack of progress across a number of agencies. I genuinely understand the frustration of the local community around the River Nanakin who every night are worried about whether a substantial amount of fluvial rainfall could affect their homes, the consequent damage that causes and the lack of insurance in that regard.
Regarding the substantive issue of the provision of new flood cover or the renewal of existing flood cover, it should be noted that this is a commercial matter for insurance companies and must be based on a proper assessment of the risks that they are accepting.
These are often considered on a case-by-case basis and it is important to be clear that neither the Government nor the Central Bank has any influence. The Central Bank's consumer protection code contains no provisions that compel an insurance company to accept a particular insurance risk.
This reply is written from the perspective of the Department of Finance and I might put some of my own flavour on it. I understand that insurers try to provide flood cover wherever possible. However, in some cases flood insurance is not economically viable for insurance companies and, in the interest of keeping premiums affordable for policyholders in general, insurers decline flood cover for new business for some risks, or, in certain cases, need to withdraw flood cover upon renewal.
I understand that flood insurance cover is available to most householders; it is estimated that there are difficulties for only 2% of policies nationally. Furthermore, I understand that when making an underwriting decision, an insurer reviews a property's claims history and any flood protection measures implemented by the Office of Public Works or by the local authority. As a result, some people will pay a higher premium because their flood risk is higher or will have a higher flood excess on their policies. I remind the Deputy about the avenues available to those who have difficulties, complaints or queries in seeking insurance cover through Insurance Ireland's free information service.
However, the fact that approximately 2% of households cannot obtain flood insurance is a matter of concern to the Government. I and my officials in the OPW have had ongoing discussions with the insurance industry on the transfer of information on completed flood defence schemes. In January 2013 a working group was established with representatives from the OPW, Insurance Ireland and the main household insurance companies operating in the Irish market to address this issue. The work is proceeding satisfactorily. This will allow the insurance industry to take into account the levels of capital investment in flood protection measures over several decades by the OPW when assessing flood risk in localities where such flood measures have been completed. Ultimately, it is a matter for the insurance companies to decide how this information will be used, but they have committed to taking the information into account in their assessment of risk. This will facilitate the provision of flood cover in all areas that are protected by completed schemes.
The question that arises in respect of the River Naniken, which the Deputy has brought to my attention, is exactly what I am talking about. If we can get a completed scheme for it by way of dialogue between the OPW and the local authority and put in place a flood defence which the insurance companies are satisfied meets the possibility of a one-in-100-year event, or slightly less than that, then insurance cover will follow. In circumstances in which there is no such completed scheme, it is very difficult to predict that insurance cover will follow. The OPW and the insurance federation are trying to come to an agreement on that, which they have been slow in obtaining, but I hope there will be some agreement on it in the not too distant future which will give some measure of hope to people in this regard.
The Minister of State is well aware of this issue and I appreciate his response. A flood forum has been established, residents are in need of cover and insurance companies are not engaging, and meanwhile a recommendation has been made that a hydraulic analysis be undertaken on the river in question, but it is not going ahead. We cannot have a solution for the insurance companies until a hydraulic analysis is undertaken that could identify a long-term solution. We are in a classic catch-22 situation. Insurance companies are not engaging because they have a certain understanding of the risk. We would have a better understanding of the risk if the city council agreed to spend the €50,000 that was unanimously agreed to by every councillor in Dublin City Council, yet the city council is not willing to spend the money. Where do we go from here? The residents will stay in limbo and we cannot go anywhere with this. What are the long-term ramifications of this, not only for the particular street concerned, which obviously is of importance to me in my constituency, but across the city and country? When we establish a flood forum that identifies certain solutions, what power does it have and what changes can it make? If it just descends into being effectively a talking shop that gives information, people will quickly lose interest in it. They will lose faith in it and will stop engaging with it and they may take some other route which could be much more expensive for the local authority and for the OPW in the long term.
I thank the Deputy for his comments and appreciate his frustration. My understanding is that the flood forum has met. As Minister of State with responsibility for the OPW, the questions I would ask are what it is doing, whether it has made specific recommendations and whether there has been an assessment of risk in respect of each household across the affected street. My understanding is that preliminary meetings have taken place, and I believe further meetings should be arranged as soon as possible. It should get on with this. If Dublin City Council brings forward a scheme to my Department, either by way of a minor works scheme, which covers works up to a cost of €500,000, or a major capital scheme, covering works at a cost of over €500,000, we will prioritise it and get on with it. However, we have to be sure it is a solution that will resolve the problem. There is no point in spending segments of funding on a hydrological survey if its findings are not going to resolve the problem. That is the challenge for the local authorities and the flood forum: to produce a solution that is workable and that meets cost-benefit criteria. There is a solution to every problem, but we should not spend millions upon millions of euro on works if the impact of such works is very minimal compared to the total expenditure. I will check the position regarding the flood forum, what exactly it is doing and whether it is making recommendations to my Department. I have a very open mind about how we can help Dublin City Council and the residents living close to the River Naniken, who have been dreadfully affected by this. Where the OPW has put in place schemes that have resulted in major capital infrastructure projects, insurance cover follows, as it should follow. If we rectify a problem, the insurance companies will then offer cover because it is in their interests to make money through doing so. I cannot envisage insurance companies making an investment in flood cover in circumstances in which we have not spent money and have not produced a solution. We need to get to the solution - if there is a solution. That is the question.