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The winter from hell?

As floods continue to submerge the UK, insurers have been bailing under the sinking weight of relentless bad news. Here we round up the most recent headlines including their battle to avoid sharing the blame for the Prime Minister's falling approval ratings… 

When the political correspondents on Fleet Street begin writing about them, insurance industry bosses know they're in for a rough ride. Two months of horrific weather have finally brought the media's pointy finger onto insurers, whose' bosses were called to Downing Street after it appeared that a new scheme created to keep flood insurance affordable for everyone, may leave some out of pocket. According to the Guardian's political editor Patrick Wintour, this was particularly important for David Cameron, whose Tory heartland stood to lose out the most. "Downing Street is to hold a floods clear-up summit with insurance industry leaders amid signs that thousands of wealthy victims of rising waters in the Thames Valley and West Country are likely to face a £1,000 increase in their annual insurance premiums next year," he wrote on 18th Feb, adding that a new Comres ITV poll shows The Prime Minister is "losing the battle to impress the public about his handling of the floods. Nearly two-thirds of Britons (63%) think the government is emerging from the current extreme weather situation with a worse reputation for crisis management".

The problem for Number 10 and why the Prime Minister wants the insurance industry to pick up the tab is that for a long time, Whitehall had an agreement that insurers would provide cheap cover for flood-prone properties. In exchange, the government promised to 'invest in flood defences'. As of June 2013 however, this deal was void and the replacement; 'Flood Re' looks set to leave many of the wealthiest homeowners; those in council tax band H, footing the bill; hence the aforementioned Mr Wintour's enthusiasm for this particular angle…

However, as PremExtra went to press, the Prime Minister stepped in and demanded 'a review' of the policy exempting Band H home from the Flood Re scheme. According to a Whitehall memo seen by the Financial Times, Downing Street has now directly ordered a review of this exclusion and has asked Oliver Letwin, the policy minister, to work out a way to include these households in the flood insurance cap.

Medical records for sale?

Later in the month, insurers found themselves in potentially hotter water after a front-page Daily Telegraph expose reported on the purchase of millions of medical records from the National Health Service. The paper pointed the finger at "a major UK insurance society" which had been able to "obtain up to 23 years of hospital data, covering 47 million patients, in order to help companies 'refine' premiums on policies such as critical illness or life insurance". What the Telegraph described as a 'major UK insurance society' was an actuarial group, The Staple Inn Actuarial Society, and so far the story appears not to have rippled beyond that particular circle (insurers have not made any statements). It has however, prompted a stern rebuttal from the number crunchers at the Institute and Faculty of Actuaries. They said: "In a story published by the Daily Telegraph, research by the IFoA was represented as 'NHS data sold to insurers'. This is not the case. The research referenced in this story considered critical illness in the UK and was presented to members of the Staple Inn Actuarial Society (SIAS) in December 2013 and was made publically available on our website.

 "The IFoA is a not for profit professional body. The research paper - Extending the Critical Path - offered actuaries, working in critical illness pricing, information that would help them to ask the right questions of their own data. The aim of providing context in this way is to help improve the accuracy of pricing. Accurate pricing is considered fairer by consumers and leads to better reserving by insurance companies.

 "Nowhere in this paper does the IFoA recommend a change in insurance pricing."