Home insurance premiums rising

The cost of an annual home buildings insurance policy rose again for the sixth successive quarter, while the cost of contents cover has bounced up following recent falls according to the latest AA British Insurance Premium Index.

The average quoted premium for a buildings insurance policy rose by 1.6 per cent over the quarter, and 9.8 per cent over the year, to over £227: its highest level since the Index began in 1994. Contents premiums also rose just 1.8 per cent to £125 but this is still a few pence less than this time last year. The cost of a combined buildings and contents policy remains almost unchanged at £298.

The AA Index has been tracking home and car insurance premium movements every quarter since 1994, taking premium quotations from 85 insurance providers for a representative basket of 800 ‘customers' throughout the UK.

The Shoparound index, which averages the lowest three premiums for each ‘customer' and is closer to what most people are likely to pay for their cover after shopping around, showed small falls for all three types of cover, suggesting that the market remains highly competitive. Average Shoparound premiums were: buildings, £130 (down 2.1 per cent); contents £67 (down 0.4 per cent and combined £192 (no change).

"Home insurance offers remarkable value for money despite the nearly 10 per cent rise in the cost of buildings cover over the past year," says Simon Douglas, director of AA Insurance.

"Many commentators believed that the recession would see significant rises in theft and accidental damage claims, and thus premiums, but this hasn't proved to be the case. Although insurers are reporting increased claims, these only now seem to be affecting contents premiums which, over recent months, had been falling.

"So far as home buildings insurance is concerned, a rising number of sporadic severe weather events such as including storm damage and localised flooding, is forming an increasingly disproportionate share of claims costs.

"The industry is also concerned that more funding is needed to improve drainage systems and flood defences and expects the value and frequency of storm claims to continue increasing - insurance premiums have been reflecting that."