Riot damages reforms are questioned by insurers

Police officer and burning car during riots of August, 2011 Image copyright Getty Images
Image caption Most motorists would be outside the new Act, say insurers

Insurers have warned that proposed changes to the Riot Damages Act could lead to higher premiums or reduce access to insurance.

Riots that affected areas across England three years ago left police forces with a large bill under the act.

But the Association of British Insurers (ABI) claimed that planned changes to the act would leave businesses and motorists facing higher bills.

The Home Office said no final decisions had been made on reforming the act.

'Overdue for reform'

Under the current Riot Damages Act of 1886, people who suffer loss or damages during a riot must claim compensation from the local police budget.

Following the riots of August 2011, police were inundated with claims and insurers estimated clean-up costs would reach £200m.

A subsequent independent review of the act recommended a series of changes, concluding that it was "well overdue for reform".

Consultation on the proposals to update the act has recently closed. The Home Office said the planned new rules would discourage under-insurance, clarify the claims that could be made, protect the vulnerable, speed up the claims process, and take into account the affordability of the act.

Claims would still be made to the police. However, among the proposals are limits on who can claim. For example, only businesses with an annual turnover of less than £2m would be able to claim, and another proposal is that only motorists with third-party insurance could make a claim to police rather than just their insurer.

Image copyright Getty Images
Image caption The riots in August 2011 caused extensive damage across England

However, the ABI estimated that for every £10 paid out in compensation after the 2011 rioting, only £1 would be paid out under the reformed act.

The association - which has submitted its views to the consultation - claimed that a proposed cap would leave only the smallest businesses to claim compensation following a riot and that many motorists would still not be covered.

It also suggested that insurers would be limited in recovering the cost of riot claims, which could have an effect on policies for businesses and individuals.

"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," said Huw Evans, of the ABI.

A spokeswoman for the Home Office said: "Small and medium-sized businesses are at the heart of their communities and it is right that the government supports them when they suffer unexpected loss or damages."

She said the act was more than 125 years old and needed updating. Its purpose was to provide a safety net for businesses and individuals, and the aim was to ensure it did so in the future.

"Interested parties, including the Association of British Insurers, were invited to comment and provide data to inform the consultation. No final decisions have been taken on changes to the act. We will now consider responses to the consultation and will decide which proposals to take forward in due course," she added.

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