ARTICLE IN PRESS

Journal of Environmental Management 81 (2006) 351359

www.elsevier.com/locate/jenvman

Confronting ood risk: Implications for insurance and risk transfer

Emma J. Trebya,, Michael J. Clarkb, Sally J. Priestb
a
Environment and Geographical Sciences, School of Conservation Sciences, Bournemouth University, Poole BH12 5BB, UK
b
School of Geography, University of Southampton, Southampton SO17 1BJ, UK
Received 28 May 2005; received in revised form 17 September 2005; accepted 1 November 2005
Available online 14 March 2006

Abstract

The UK oods in late 2000 reinforced an emerging awareness which questioned the long-term sustainability of an exclusive reliance on
hard-engineered ood defences to protect the UK population against increased ood risk. The debate has subsequently focused on a
broader interpretation of the risks associated with ooding. This paper explores the notion that, although social and technical issues are
already being integrated to understand and manage ood, practitioners are now realising the importance of accommodating public
hazard understanding and perception of risk into their management models, and there remains a need to t such ideas to the insurance-
based system of ood management in the UK.
r 2006 Elsevier Ltd. All rights reserved.

Keywords: United Kingdom; Flood risk management; Risk transfer; Insurance industry

1. Introduction The purpose of this paper is to explore the potential

Despite signicant advances in engineering practice and
management approach over the last two decades, ooding
continues to pose a major challenge in both advanced and
developing countries. The United Kingdom reects these
trends and serves as an effective context within which to
identify and evaluate the underlying issues. Emphasis on
the need for better ood defence has been replaced with a
questioning of the long-term sustainability of a strategy
based exclusively on structural defences in light of
predicted sea level rise and changing oodplain manage-
ment demands (Dlugolecki, 2000; Environment Agency,
2001; CEC, 2004; Defra, 2004). Furthermore, there has
been a realisation of the need to address social pressures
and the incidence of ooding, i.e. an increasing exposure
and vulnerability to ood (Brown and Damery, 2002).
Such critical reection has ensured that the debate now
focuses on the broad management of risk associated with
ooding (Evans et al., 2004a, b; Defra, 2004).
Corresponding author. Tel.: +44 1202 965430; fax: +44 1202 965046.
E-mail addresses: etreby@bournemouth.ac.uk (E.J. Treby),
M.J.Clark@soton.ac.uk (M.J. Clark), S.J.Priest@soton.ac.uk
(S.J. Priest).
barriers and opportunities for putting into practice such
advances in understanding, although the example pre-
sented is British, the implications and recommendations
presented have global applications. Within the UK, social
and technical issues are considered integral for the effective
understanding and management of ood, and the impor-
tance of accommodating public hazard understanding and
perception of risk into ood management models has been
clearly recognised. However, there remains a need to t
such ideas to the current system of ood management.
Stated simply, there is a need to consider the operational
infrastructures of ood governance and its impact on ood
management for risk reduction.
This paper emerges from work initiated through a
TSUNAMI-led (Technology and Science in Universities
and Met Ofce for Insurance Implications) project
investigating UK ood risks. As part of this study,
extensive numbers of interviews with members of the
insurance industry and related professions were undertaken
to gain an impression of the state of the status and opinions
of the UK ood insurance market. An interview approach
was adopted in order to examine attitudes within the
insurance industry about the present viability of the
industry and future scenarios, as well as examining

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doi:10.1016/j.jenvman.2005.11.010
 ARTICLE IN PRESS
352 E.J. Treby et al. / Journal of Environmental Management 81 (2006) 351359
potential solutions. Interest in this area has also been
driven signicantly by the Millennium oods, caused by
the wettest October and November in 270 years (ABI,
2001a; EA, 2001) and the resulting losses including an
insurance bill of over 1 billion [$1.8 billion] (ABI, 2002a,
p. 3). The Department for Environment Food and Rural
Affairs (Defra) estimate that 200 billion ($366 billion) of
assets, which includes 1.7 million homes and 130,000
commercial properties are currently at risk from ooding in
the UK (Defra, 2001). The periodic nature of ooding
ensures that events of similar magnitude have not occurred
since 2000, but there has been a backdrop of more minor
but still signicant oods to maintain the pressure on
stakeholders. The newly emerging ood debate thus now
needs go a step further to ensure that such ideas are linked,
driven and indeed constrained by the needs and demands
of the current system.
Currently, it is the UK insurance industry that enables
householders and small businesses to minimise the impact
of damage caused by ood. The paper focuses therefore, on
the potential role of insurance within UK ood risk
management, with a particular attention paid to its
inuence on attitude change and risk awareness processes.
2. The relationship between hazard, vulnerability, exposure
and risk
In recent years, the focus of hazard management has
shifted away from physical processes alone and has, in
turn, embraced its socio-economic, political and beha-
vioural underpinnings. As a result, thought has instead
been given to the importance of risk management for
hazard reduction (Blaikie et al., 1994; Hewitt 1997; Parker
et al., 1997; Smith, 2000). A discussion of risk can suggest
a move into the subjective world of perception, where
different people and their belongings experience varying
degrees of risk associated with ooding. This implies that
ood risk can be assessed in quantitative terms as well as
being accessible and understandable through qualitative
investigation. The risk of ooding is therefore not only
associated with the physical nature of the peril, e.g.
frequency and magnitude and proximity to it, i.e. living
on a oodplain, but more importantly relates to the ability
to manage, cope and adapt to the event itself. Risk is hence
the conjunction of the natural physical hazard and the
socio-economic vulnerability of the population affected
(Priest, 2003, p. 34).
Hazard management literature utilises various models to
explain the relationship between hazard, vulnerability,
exposure and the resultant risk, and includes, but is not
limited to, The Risk Triangle as articulated by Crichton
and Mounsey (1997). The model is useful in its simplicity,
and in its suggestion that risk encompasses a combination
of hazard, exposure and vulnerability (Fig. 1).
The Risk Triangle has been utilised to analyse ood
insurance (Crichton, 2001), being particularly appropriate
for the industry as it articulates risk as being the area of
Flood Hazard
Risk
Vulnerability Exposure
Fig. 1. The Risk Triangle (after Crichton and Mounsey, 1997).
the triangle, the sides of which represent hazard, vulner-
ability and exposure. It hence suggests, that if any one
element increases/decreases then the related side of the
triangle, area of the triangle and hence the amount of risk
will increase/decrease accordingly.
Using the above terms, it is suggested that ood risk in
the UK is increasing. It is cogently argued that climatic
change factors are increasing the risk of the ood hazard
(Environment Agency, 2001). Moreover, inadequate ood
and drainage systems, changes in land use and urbanisation
have amplied the risk of the physical ood hazard
(Burgess et al., 2000). The pressures of such a hazard are
exacerbated by an increased exposure caused by increasing
ood-prone assets, which have escalated due to rising
property values, consumer afuence and a sophistication of
lifestyle (Pye, 1996; Berz, 1997). The pressures are also
compounded by an increasing vulnerability to ood,
notably in terms of the location, layout and construction
of properties in the high-risk zones. The resultant ood risk
is hence an amalgamation of the nature of the physical
hazard and relative exposure and vulnerability to it, and
it is indeed increasing. Therefore, if we are to manage
ooding more effectively:
The goal of oodplain management should not be ood
loss reduction per se, but to take steps to ensure that loss
susceptibilities [exposure] and vulnerabilities are mini-
mized. (Parker, 1995, p. 361)
However, who should be taking the steps? It is not only
the individual actions of affected ood-zone dwellers that
increase the risk of ood, but also current planning policy
and practice, (which) albeit unintentionally, foster(s) an
environment susceptible to ooding. (White and Howe,
2002, p. 743)
Whilst it is the potential ood-zone dweller who makes
the decision whether or not to live at high risk (either
knowingly, due to ignorance of the ood risk or due to
other constraints including cost, housing availability or
other social factors), many other parties are in some way
responsible for this decision-making process, for example
the property sellers, estate agents, valuers, solicitors,
lenders and insurers (Clark et al., 2002). Although this
does suggest that personal responsibility is somewhat
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unimportant, focus on this alone prevents consideration of
the notion that the responsibility to take appropriate steps
to reduce ood risk is spread rather more widely through
society.
Population demographics have created pressure to
develop the oodplain. However, there are many involved
parties responsible for making the decision to allow such
development to proceed, whether they are the planners,
developers or insurers. Government planners are currently
in a difcult position, balancing the need to provide more
housing (particularly in the south east and East Anglia)
against the requirement to avoid development on the
oodplain or in areas, which can inuence the effectiveness
of the oodplain when in ood. Developers need to
consider the economic cost and benet of building in a
oodplain/ood-prone zone when the onus is on them to
undertake ood defence construction and maintenance.
Insurers can benet from working with the Environment
Agency (or other parties such as Defra itself) regarding the
long-term viability of providing ood cover for any new
developments in ood risk areas. Finally, individuals
decide (on a more or less informed basis) whether to
purchase a property in a ood-prone zone. All such parties
are inuenced by their awareness of ood risk when
making their decisions. Moreover, according to the
TSUNAMI research data, most parties have assumed a
reliance on structural ood defence as the primary
approach to reducing their potential risk, though other
approaches are now emerging in the UK. The implication
is that risk confrontation is a decision within which some
form of risk awareness is required by all involved parties
the public, insurers and government, thus a convention
has emerged whereby public education is seen as the key
mediator in that decision.
3. Awareness, public education and behaviour
In the past, failures of ood-related policy have often
been blamed on an irrational public, and the standard
reaction has been to give the public more information
(Brown and Damery, 2002). This is not always a sufcient
strategy, as education does not necessarily lead to change in
the perception of risk or indeed of behaviour in relation to
that risk (Treby and Clark, 2004). Moreover, as stated in the
previous paragraph, ood risk awareness needs to be
consistent across all involved parties to include planners,
developers, insurers as well as the public. Additionally, all
involved parties have knowledge of ood that is subjective
and contextualised and which forms the basis of their
perceptions. Such knowledges should not be disregarded as
invalid and irrational for it is the varying perceptions of risk
rather than reality of risk that must be managed (Fig. 2).
There is a need, of course, to consider the temporal and
spatial nature of such a model. In essence, the triangle is
three dimensional. Previous experience, education and
awareness and expectations of ood management all
change with time from an event. Spatiality is also central
353
Past experience of
flooding
Perceived
Risk
Knowledge and Expectations of
awareness of the flood management
Fig. 2. The Perceived Risk Triangle (Priest, 2003).
gains which changes and this triggers
Information Attention Attitude Action
(MESSAGE) (COMPREHENSION) (INTENTION) (BEHAVIOUR)
Fig. 3. The linear model of behaviour change. (after Fishbein and Ajzen,
1975; Ajzen and Fishbein, 1980 in Eiser and van der Pligt, 1988; Eiser,
1986; Zimbardo et al., 1977).
to all three factors, with perception generally being
heightened with closer proximity to ood. These percep-
tions are the basis of each individuals local knowledge
and resultant behaviour towards ood. Hence, for these
perceptions to be managed, local knowledge must be
acknowledged.
It is important to ensure that local knowledges become
an important information tool for ood managers. But
there is more to the story than realising that the public
(and other stakeholders) may be experts in their own right
(e.g. Irwin and Wynne, 1996; Wynne, 1996; Szerszynski,
1999). The dominant view as advocated by Viscusi and
Zeckhauser (1996) is that receipt of information regarding
ood risk will ensure a shift in the perception of ood risk,
which then leads to a benecial change in ood manage-
ment expectations. However, this view has long been
abandoned within academia and ood risk management.
This traditional process of educating the uneducated, so
often still utilised in public awareness and stakeholder
participatory procedures, is problematic (Eden, 1996) given
that the relationship between education, attitude and
behaviour is more complex than the classic linear progres-
sion (Fig. 3).
Although this model is enticing in its simplicity, such
linearity suggests that intention to change (i.e. attitude)
links directly to an action on the basis of that intention (i.e.
behaviour). However, it is unlikely that knowledge receipt
and comprehension formation alone will ensure that the
message is retained, or indeed that any subsequent action
will be actively sustained over time. Although such
discussions are rmly established in the psychological
literature (e.g. Mackenzie-Mohr, 2000; Stern, 2000), they
have yet to be fully transposed and developed into applied
environmental planning and management. This realisation
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354 E.J. Treby et al. / Journal of Environmental Management 81 (2006) 351359
undermines the traditional view that inappropriate attitude
and knowledge are the only barriers to behaviour change.
More importantly, it suggests that other barriers are
often not researched before awareness-raising and beha-
viour-change programmes are made operational. For any
educational campaign to be successful, the barriers must
be assessed. Information, however compelling, is unlikely
in practice to trigger sustained behavioural change unless it
is incorporated within a communication process that is
sensitive to the drivers of, and barriers to, fundamental
changes of attitude.
Furthermore, it is unlikely that people fail to
engage with information because they are suspicious of
those who create it. Rather, it is the existing ood
management system that makes it unnecessary or
difcult for them to do so. The ood-vulnerable UK
population is largely ood-aware (BMRB Social Research,
2001), thus basic awareness is obviously not the
problem. It is therefore sensible to consider the following
questions: What are the barriers to attitude and behaviour
change and to the resulting better disposition of risk
acceptance between society, government and insurers?
And, what does the current response system permit or
indeed, encourage?
4. The current system of UK ood risk response
Flood recovery and resilience in the UK is unusual in
that it relies on a commercial market-based insurance
system for its management. Flood cover has been a
standard feature of domestic comprehensive insurance
policies since the early 1960s (ABI, 2002a), when the
insurance industry entered an informal agreement with
the government to provide ood insurance within compre-
hensive household contents insurance for all areas in
the UK. It can therefore be argued that at the time
of the 2000 oods, the insurance industry provided a
comprehensive buffer against risk, whilst the underlying
vulnerability and exposure to ood were not being
reduced. Furthermore, Arnell (2000) suggests that insur-
ance can lead to an increasing exposure to risk, as the ood
cover encourages properties to remain on the oodplain.
Consequently, if there is a call to confront risk and
vulnerability, there is a need rst, to focus on the insurance
system and its opportunities for change. In essence, the
presence and availability of ood insurance is preventing
people from addressing underlying ood risk to the full
extent.
The British insurance industry is the biggest in Europe
and the third largest in the world (ABI, 2003). Currently
61% of households purchase buildings insurance at an
average cost of 168 ($307) per year and 78% purchase
home contents insurance at an average cost of 144 ($263)
per year. This compares to 68% who purchase motor
insurance at an average cost of 426 ($780) per year
(Family Expenditure Survey, 2001) although property
insurance is the largest class of general insurance in the
UK (ABI, 2003). It would seem that the insurance industry
is well placed to carry the burden of risk associated with
ood. However, since 1990, weather-related insurance
claims have cost approximately 825 million ($1.5 billion)
per annum in the UK (ABI, 2001a, b). Although the
insurance industry has to date, remained relatively stable, it
is now considered the most likely of all nancial services to
be signicantly affected by climatic change (Dlugolecki,
1996; Defra, 2004). The safety net of reinsurance has also
been reduced as a result of an increasing frequency and
magnitude of claims due to extreme weather. When
coupled with the fact that general non-life insurance is
becoming increasingly less viable, largely due to competi-
tive pressures and changing regulations, it is clear to see
that the burden needs to start to be spread more widely.
At present, the insurance industry has no desire to
withdraw ood cover from property insurance policies as it
wish[es] to continue providing affordable cover to as
many domestic and small business property owners as
possible (ABI, 2001b, p. 1). However, some elements in
the system have begun to change (partly through a greater
focus on assessing competitive but risk-based premium
rates) to enable insurance cover to remain sustainable in
the longer term.
There is a need to broaden the risk burden across
government, the insurance industry (Green and Penning-
Rowsell, 2004) and vulnerable society. A move towards
this has been clearly apparent within the last few years. For
example, the agreement between the ABI (representing
91% of UK general insurance business) and Government,
for UK insurers to continue to provide ood cover is stated
within their 2-year agreement from 2000 to 2002, which has
now been extended in a statement of principles articulated
by ABI to apply from January 2003 (ABI, 2002b). This
agreement continues to reect the position of the ABI,
however depending on the progress made in a number of
areas, this agreement may be subject to further review
(ABI, 2005).
The statement from the ABI requires action from
Government in the form of commitment to providing
adequate ood defences or improvement to existing
structures in line with that set out in Defras 2002 spending
review; full implementation of Planning Policy Guidance
Note 25 (PPG25) (DTLR 2001); increased transparency in
the form of public availability of the Environment
Agencys ood asset database; improvements to ood
warning systems; consideration of integrated drainage
management in England and Wales; the implementation
of realistic solutions to sewer ooding (ABI, 2002b); and
the Defra (2004) consultation exercise on developing a new
government strategy for ood and coastal erosion risk
management in England. From this agreement, the
foundations have been laid for the re-allocation of risk,
albeit based on a rather technocentric vision of how to
achieve a reduction of ood risk (i.e. a strong reliance on
structural measures to reduce the risk of hazard). More-
over, a further complication is that the three factions of
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E.J. Treby et al. / Journal of Environmental Management 81 (2006) 351359
society, Government and insurance currently interact in a
complex fashion.
There is a further problem, in that many agencies within
the housing and insurance industries have a vested interest
to continue occupation of the ood zone, e.g. developers,
estate agents, construction, valuers, solicitors, loss adjus-
ters, etc. Whilst these professions often do not directly
suffer from the consequences of ooding, their actions can
impact both negatively and positively on ood risk and
hence they need guidance on practice. Moreover, although
Local Authority planners, directed by Planning Policy
Guidance Note 25 (DTLR, 2001), are now at pains to
ensure ood risk is a material planning factor and they are
increasingly pressured by the strengthened position of the
Environment Agency to avoid building in the oodplain,
they are also subject to increasing pressure to accommo-
date the escalating housing requirement for their area. In
turn, it is the insurers who underwrite this increasing risk
from ood and hence it is they who continue to carry the
burden of risk.
In circumstances where a mortgage is required for a
house purchase to proceed, insurers have become an agency
facilitating or constraining development. This reactive
approach by Government and insurers alike is problematic,
not only because development is potentially at odds with
vulnerability, but more importantly because the sustainable
approach to ood requires a reduction of risk by pro-action
and adaptation by people rather than of the environment.
An approach that meets the sustainable (inter-generational)
mission now promoted by most management organisations
requires sacrice by the present generation and is not easily
achieved in practice, not least when there is a reliance on
one industry (insurance) to provide protection from the risk
of ood. Technical (often unsustainable) solutions remain
comfortable and comforting to insurers and the public
alikethey are also easy to blame when things go wrong. A
shifting of response to social or economic domains is the
challenge (Clark et al., 2002).
New ideas for effective oodplain management need to
be linked and driven by the operational infrastructures (i.e.
the existing interconnected planning and insurance system)
in order that new strategies are need- and demand-driven
and appropriate for the current system of governance.
There is a need for the insurance industry and Government
to move to the next stage in their constructive dialogue in
terms of challenges faced and barriers to be overcome.
Moreover, there is a need for both parties to engage with
the public in more than the traditional consultation
exercises. Much change has taken place from 2000 to
present (Defra, 2004), but the issue is not closed. What is
the next step?
5. Addressing the roots of vulnerability: opportunities for
intervention?
Flood control cannot keep pace with development,
therefore true ood prevention (and adaptation) must
355
address physical, social, economic and political factors
inuencing wider society and underpinning the impact of
oods (White and Howe, 2002). In turn, it makes sense to
consider what it is that makes people vulnerable to ood
what are the root causes and how can they be addressed?
This broadening of the approach to ood risk management
from an engineering exercise to an integrated physical,
economic and social assessment lay at the heart of the
Foresight Future Flooding report (Evans et al., 2004b),
and has subsequently been taken up strongly in Defra
strategic proposals (Defra, 2004).
Until this point, the discussion has centred on the need
to change the focus of the ood risk debate: to reduce the
barriers to risk confrontation and to begin the process of
adapting to ood rather than adapting our physical
environment to suit our perceptions of how an environ-
ment should behave. The argument also focuses on
adopting a more proactive rather than a purely reactive
response. However, all such thoughts are built on the
premise that we have the choice to confront risk and that
we are able to adapt to ooding. In practice, is it true that
we all have this choice to make?
Aside from the fact that insurance currently prevents the
need for us to actively engage with the notion of ood risk,
we also need to ask if everyone is capable of making the
choice to engage. First, we have little choice to confront the
risk of ood if we are not aware of the risks existence or if
we misunderstand the nature of the risk. Second, we do not
have a choice to confront the risk if we understand the risk
but have no power to act. A lack of power in this process
could relate to the inability to afford adequate home
contents insurance (and hence, ood cover) (Priest et al.,
2005). Exclusion from ood cover is most frequently
considered to be the result of ood risk, i.e. the insurers
refuse to offer cover on the basis of excessive ood risk.
However, there are many who are socially excluded from
home contents insurance and thus to ood cover. Accord-
ing to Whyley et al. (1998), of the 22% without home
insurance cover, 49% are price excluded. This problem is
highlighted by the Family Expenditure Survey (1998)
which states that a smaller proportion of households
purchase cover in the lower income brackets. There are, of
course, many more householders who are under-insured,
however the extent of this problem is more difcult to
assess. The problem of social exclusion is unlikely to
disappear and it will be difcult to remedy within the
current operational framework. Options to address social
exclusion are numerous although not without their
difculties, and include: pay-with-rent schemes, a ood
insurance pool or government-run ood insurance.
It has already been suggested above that insurance can
act as a barrier to awareness and action, but actually, it
also has the opportunity to be a catalyst and tool to raise
awareness, provide education and provoke action. For
those who are price excluded, the problem remains difcult
to solve, but for those who are not aware and hence
have no reason to act, or for those who do not see the
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356 E.J. Treby et al. / Journal of Environmental Management 81 (2006) 351359
necessity to act due to ood cover, insurance has a critical
role to play.
This type of approach has been operationalised in the
US with the National Flood Insurance Program (NFIP).
Through the tying of the availability of insurance and
insurance subsidies to mitigation measures and building
codes, the requirements of this scheme aims to encourage
more sensible building and the public to take some of the
responsibility for ooding. Although the uptake of the
scheme is not universal and the true effectiveness at
development control is questioned (Burby, 1998), the
scheme has managed to raise awareness of ooding in
many areas has begun to instigate the regulation of
development (Platt, 1998).
Flood insurance thus needs to be viewed as a ood
management tool. In this light, insurance can help to share
losses and adapt and adjust to ood. According to Arnell
(2000), insurance can be seen to provide three main
functions (in addition, the industry has the ability to
increase awareness of ood and actions to cope with
ood):

Reimburse damage costs to promote socio-economic
resilience.

Enable spread of irregular and geographically conned
ood losses over time and space.

Encourage actions to reduce exposure and vulnerability
to ood loss.
The full potential of the last point has yet to be realised,
yet is most critical if resilience of the system is to be
enhanced. Flood insurance can aid oodplain management
by inuencing decisions to locate in the oodplain
and it also has the potential to encourage the use of
measures to minimise damage (Doornkamp, 1995; Arnell,
2000). Phrased more specically, insurance against
ood accelerates socio-economic recovery after loss
and creates impact limitation via insurance restriction,
pricing and discouragement of new development in
risk zones (Clark, 1998). Risk transfer simply has to
occur for the system to remain sustainable over the longer
term.
6. Risk transfer and the associated barriers
Currently, exposure to risk is managed via nancial
means, i.e. ood insurance, however, it is important to use
this risk transfer mechanism to better effectvia the tool
of mitigation.
Mitigation strategies such as early warning systems and
the formulation of advice provide a degree of protection
against much of the potential ood hazard and allow the
loss potential to be lowered (Black and Evans, 1999). Other
strategies undertaken by the responsible authorities take
the form of structural ood defence, red-lining and other
hazard mapping techniques. However, ood insurance
itself can also be utilised as an effective mitigation tool
(Reitano, 1995). For example, insurers have a potential
role in managing new developments as they can restrict
cover to those in oodplain areas, those with inadequate
protection or those houses suffering recurrent oods
(Crichton and Mounsey, 1997).
A transfer of risk responsibility from the insurer, to all
those impacted by ood will not take place until the
insurance industry addresses a number of issues. First,
there has traditionally been no link between ood risk and
insurance premium (except in a few cases), but since 2001
there has been a move towards a more competitive but
more closely risk-based approach to pricing. Mitigation is
key and a sensible alternative to continued insurance
for repeatedly ooded properties, e.g. ood-proong or
compensation should be considered. Second, ood cover is
included as part of the standard comprehensive household
insurance and unless it is decoupled (e.g. with an excess
as with subsidence cover, or as a separate policy) its
signicance will not be realised by the insured property
owner. This is problematic however, as although awareness
of the issue would be raised by a decoupling of the ood
insurance, this measure might also create some negative
consequences. Unless, ood insurance was made compul-
sory there may be a reduction in uptake of this insurance.
In addition, the separation of ood insurance from the
bundled policy would also increase the administration and
transaction costs of insurers. Third, the process of seeking
and gaining insurance also buffers the public from the
reality of risk. For example, block insurance (e.g. insurance
bought through the mortgage provider) and insurance
purchased by the owner of rented property all serve to
promote remoteness to the contents of the insurance
policy.
Market incentives, as Natsios (1991) suggests, are
possibly the most effective way of changing social
behaviour. Thus, ood insurers could play a critical role
in risk reduction and avoidance via the use of nancial
(dis)incentives:

Lower deductibles, i.e. lower premiums for properties
that take action to reduce their exposure to ood risk,
e.g. ood-proong.

Bonuses for non-claims.

Premium pricing related to riskplacing the onus
on the client to assess their reaction to the known risk
as highlighted by premiums that are high or indeed
lacking.

Resilient re-instatement. i.e. reconstruction undertaken
as a result of insurance payouts that aims to reduce the
risk of future losses (Arnell, 2000).

Compensation and re-housing in an area of lower ood
risk. However, for this (and the previous) strategy to be
adopted would require a degree of government inter-
vention.
Kunreuther (1996) suggests that, before a disaster,
affected parties tend not to adopt measures to reduce
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E.J. Treby et al. / Journal of Environmental Management 81 (2006) 351359
potential losses from a future event. The use of nancial
incentives enables the rst step away from reaction
and a curing of symptoms and towards prevention or at
least a decrease in risk (pro-action after one ood and
before the next), rather than continual reaction after each
ood. Mitigation measures also provide the important
role of general awareness-raising, which in turn can
enable further risk reduction. The utilisation of such
tools encourages the house owner to engage with the
risk of ood. For example, the use of no-claims bonuses
would ensure that insurers were relieved of a large number
of small losses (more easily rectied by the client).
However, the disincentive of potential ood damage
costs to the client would also ensure that they are more
prepared to take measures to minimise losses themselves
(Berz, 1997).
7. Spreading the burden of risk: the next steps
Recognition of risk is the rst step. There is a need for
more understanding of the reality of ood risk, not only by
the public, but all responsible parties. This cannot ensure
behaviour or even attitudinal change, but will enable all to
be informed of risk and its changing nature. The second
step is to eradicate complacency and the environment of
blame within the current system of ood management.
Government (central and local) and associated agencies,
house transfer professionals, insurance industry, housing
industry and the public all have an element of personal
responsibility. The third step is to understand and allow for
benecial change within the complex and increasingly
interdependent system of the insurance industry and other
involved parties.
The following three areas should attract closer scrutiny:

Developers need to be able to assure purchasers
that insurance is available in order to justify under-
taking construction. As such, it would be benecial
for them to seek a closer alliance with the insurers.
PPG25 also places the onus on the developer to assess
ood risk and make any such information available to
purchasers.

Building regulations should be tightened to reduce
vulnerability of properties to potential ood incidents.
A closer alliance could also aid insurers wishing to
undertake resilient reinstatement but are currently
dissuaded due to the high cost of doing so, and the
competitive risks of resilient reinstatement in the
absence of a regulatory framework.

The property transfer profession (estate agents, sur-
veyors, solicitors, etc.) could have a vital role as
information givers. A closer alliance could ensure
potential purchasers receive accurate information re-
garding ood risk and the impact on insurance eligibility
and cost. This role is most likely to succeed with
government intervention associated with the procedures
involved in property purchase and sale.
357
8. Conclusion
The insurance industry is involved throughout the
processfrom site purchase, through the securing of a
loan (mortgage) and ownership transfer, to reinstatement
of a house after a ood event. Insurers have a vested
interest to become proactive in this process, however this
requires that they work together. The problem is that such
an approach is anti-competitive and requires a lowering of
barriers across the board in order for the industry to work
in concert. Such an action is at the moment also further
restricted by the Competition Act 1998 which came into
force in March 2000 (Clark et al., 2002, p. 33) which
prevents companies acting in concert. Government could
act to alter this legislation to allow companies to work
together in situations where concerted action may be
socially benecial.
To provide details of how to take the next step it is
proposed that substantial research into the viability of
mitigation measures to reduce ood risk is required. Can
insurance be utilised as a mitigation tool? Kunreuther
(2001) states that mitigation measures reduce the impacts
of a disaster. The question is, whether such tools are cost-
benecial to the insurers, yet sustainable to wider society in
an environment of increased ood risk and as part of a
wider sustainable strategy to confront ood risk? At the
same time, it is also important to clarify the link between
ood risk and property value (one of the prime indicators
of risk impact). Indeed, if a clear link is established, this
information might be used to raise awareness and as an
incentive for home owners and property transfer profes-
sions to take actions to mitigate their ood risk.
It is the government, not commercial bodies such as
insurers who have the role of ensuring social rights and
constructing expectations and hence they have a role in
alleviating pressure from the insurers. In principle, it is the
case that insurers primary responsibilities are to their
clients and shareholders. The reality, it seems, is that
insurers are currently being expected to adopt social
conventions and goals and although all organisations
require a sense of social responsibility, this expectation
from Government is both inappropriate and unrealistic if
taken to extremes. Whatever the detail of future insurance
approaches to manage ood risk, it remains clear that the
requirement is for a broad-based risk response partnership
to meet the challenge ooding presents. The insurance
industry requires closer consideration, as it cannot and will
not continue to carry the burden of increased ood risk
alone.
Acknowledgements
The authors acknowledge with gratitude project funding
from TSUNAMI and the support of its steering group. The
creative input and support of Professor David Crichton
and Dr. Kate Delaney were also crucial to the success of
the project.
 ARTICLE IN PRESS
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