On the third anniversary of the August 2011 riots, an insurance sector body warned that Government proposals to change the Riot Damages Act would leave many firms and motorists facing hardship.
The ABI (Association of British Insurers) estimates that for every £10 paid out in compensation after the 2011 rioting, only £1 would be paid out under the reformed Act. Under the Government’s new proposals all but the smallest of firms would be unable to claim compensation. And most vehicle damage would be excluded, the ABI says.
Meanwhile at the Association of Convenience Stores (ACS), Association Chief Executive James Lowman says: “During the last riots in 2011, many businesses were significantly damaged and were only able to re-open with the help of compensation through the Riot Damages Act. We agree that the Act requires reform, but strongly believe that all businesses should be considered for compensation. The exclusion of businesses with over £2m turnover would mean that many of our members with two or three shops or even a single forecourt site would be ineligible for compensation, due to the high turnover nature of their business.”
Huw Evans, Director of Policy & Deputy Director General, ABI says: “The review of the Riot Damages Act is overdue, but Government proposals to drastically cut back compensation are at odds with its intention to retain the principle that the state is responsible for the costs of riot damage, that has proved its worth for taxpayers for over one hundred years. Not only does the Act provide important protection for the uninsured, it means insurers can cover riot damage in England and Wales as a standard part of property insurance. Both would be in jeopardy under Government’s new proposals, which instead need to reflect today’s world and the needs of modern businesses. Insurers want to continue to offer riot cover as a standard part of property insurance, but such drastic change could significantly impact on premiums, lead to the incorporation of excesses for riot into business insurance policies, or the exclusion of riot from insurance cover in certain areas.
“Thankfully riots are rare, but, as August 2011 highlighted, they can have a devastating impact on communities from which it can take years to recover from. We urge the Government to ensure that changes to the Act strengthen the tried and tested approach, not leave some of our most vulnerable communities without support and place them at greater financial risk.”
The Riot Damage Act 1886 enables compensation to be paid by the police to homeowners and businesses who suffer riot damage to their property or possessions and have no insurance or are under insured. There is no limit on the amount of compensation payable. Insurers are also able to claim under the Act for any property damage claims paid to customers – this has meant that they have not needed to price for riot cover.
After a recommendation by the Kingham report into the August 2011 riots, the Government undertook to review the operation of the Riot Damages Act.
Concerns in the ABI’s submission to the Government consultation:
The proposal to limit businesses who can claim under the Act to those with an annual turnover of less than £2m would leave all but the smallest firms unable to claim compensation. Businesses with a turnover of less than £2m constituted around 9pc of the total value of commercial property material damage claims in the 2011 riots and around 13 per cent of the total value of business interruption claims. A cap would also limit the ability of insurers to recover the cost of riot claims for a risk that they had not had to price for. This could impact on the availability of riot cover under commercial policies in certain areas. As an alternative, some form of limit on the maximum amount paid under the Act would preserve the principle of state responsibility, and limit costs.
Removing consequential trading losses, such as loss of trade or rent, from the Act would impact on a business facing disruption following a riot. Businesses forced to close because they would be unable to receive compensation, would impact on the local economy and could hinder re generation in deprived areas.
Only including third party motor policies would leave the vast majority of motorists – around 96 per cent with comprehensive cover – outside of the Act. This, despite the recommendations of the independent review which called for the Act to include motor vehicles, regardless of the cover.
The intention to allow Police and Crime Commissioners to decide what constitutes a riot would create potential conflict of interest as the police are liable for riot damage, the association suggests.
Read the ABI’s full response to the Reform of the Riot Damages Act consultation.
