Cuts to riot damage payouts may deter firms from areas like Tottenham – MP

Government plans to reform the 1886 Riot Damages Act after the Tottenham riots could lead to higher premiums, say insurers

Government plans to reform the Riot Damages Act could result in a huge fall in payouts to business owners after any future unrest and would leave most drivers unable to claim compensation, the insurance industry has claimed.

On the eve of the third anniversary of the outbreak of rioting in Tottenham, north London, the Association of British Insurers (ABI) said that had the planned changes to compensation been in place in 2011 only £1 would have been paid out for every £10 worth of damage.

Under the original 1886 act, businesses with property damaged in unrest can make a claim to the police for compensation regardless of their size; those without insurance apply directly, while those with cover are paid by their insurer, which then reclaims the money.

The new rules would stop compensation going to companies with a turnover of more than £2m – as well as not reimbursing their insurers. It would also stop compensation for loss of business.

The government's consultation document shows that by June £60m in compensation had been paid for damage in the August 2011 riots, with 90% of that going to insurance firms. The ABI said stopping payments for larger businesses would force insurers to reprice for the risk of riots, which would lead to high premiums or excesses, or riot damage being excluded from policies.

There would still be payouts for damage to vehicles not covered by fully comprehensive insurance, but the ABI said this would leave 96% of motorists unable to claim.

Huw Evans, deputy director general at the ABI, said: "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 100 years.

"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 MP for Tottenham, David Lammy, said he would study the new bill when the draft was published, "but clearly we must be very careful to prevent any situation in which companies are deterred from opening shops and businesses in areas like Tottenham."

He added: "We cannot create the type of situation that we see in some parts of United States, where the insurance costs of opening a branch in a particular area outweigh the benefits of doing so.

"It was right to review the Riot Damages Act but doing so should not be an excuse to make it harder for businesses and homeowners to claim compensation in the case of a riot.

"The vast cost of riot compensation to the public purse may require some kind of cap on bigger companies, but the level of that cap needs to be very carefully considered."


Hilary Osborne

The GuardianTramp

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