AA index records rising home insurance premiums

The falling trend in home insurance premiums has come to an abrupt end, blamed on a sharp increase in flood claims, the AA’s latest benchmark British Insurance Premium Index shows.

The Index shows that over the past quarter, the average quoted premium for home buildings insurance leapt by 3 per cent – the largest single increase since the Index was launched in 1994. Home contents premiums also rose by more than 2 per cent during the quarter.

Rising tide of home insurance premiums

Six months of weather related claims have finally taken their toll on home insurance premiums, the AA Index shows. The July deluge over the South Midlands and Gloucestershire followed flooding in Yorkshire and the West Midlands, costing the insurance industry an estimated £3 billion.

“We now see the result of that devastation reflected in premiums as insurers meet the cost of drying out and repairing homes as well as temporary re-housing of families while their homes were made habitable once again,” says John Close, Insurer Relations Director at AA Insurance.

“Some predictions that premiums would rise by 15 per cent were overly pessimistic and, although I believe premiums will continue to rise as insurers dip into their reserves, I expect competitive pressure will keep increases affordable.

“One positive outcome seems to be that those who had no contents insurance are thinking again, with many insurers reporting increasing business.”

Home buildings insurance summary

Over the third quarter of 2007, the index of average quoted premiums rose by 3.00 per cent to £215.51 (over previous quarter: down by 1.89 per cent to £209.23)

Premiums have risen by 3.13 per cent year-on-year

The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) rose by 5.79 per cent to £150.86

Home contents insurance summary

The index of average quoted premiums rose by 2.29 per cent to £149.99 (over previous quarter: down by 1.32 per cent to £146.63)

Premiums have risen by 1.64 per cent year-on-year

The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) rose by 0.82 per cent to £87.92

Despite the rises over the past quarter, John Close points out that both buildings and contents insurance have risen by less than 5 per cent since the Index started in 1994. “There are deals to be done as the Shoparound index shows,” he says. “But it’s important to compare benefits and not just price when choosing your cover.”