Home insurance premiums continue upward trend

Over the past quarter, average quoted premiums for home buildings insurance rose by 1.4 per cent (to an average of £218.60 for an annual policy), according to the latest AA British Insurance Premium Index.

This follows a rise of 3.0 per cent over the previous quarter; the largest single increase since the Index began in 1994. Home contents premiums rose by just 0.4 per cent to £150.57. These rises reflect the £750m domestic property claims following last summer’s floods.

The summer 2007 floods brought a deluge of claims as they displaced 14,500 families into temporary accommodation, while their homes were repaired and refurbished.

“The average cost of each of these claims is approaching £52,000 and the insurance industry has responded sympathetically towards customers who suddenly found themselves homeless,” says John Close, insurer relations director at the AA.

“Buildings insurance premiums are at their highest since the Index began but I’m surprised that premiums have risen so little over the past quarter. I hope that the Government’s Climate Change Bill includes robust provisions to ensure that new buildings are more flood and storm resilient, particularly after the renewed flood threats of the past few days. Local authorities must also think through where new housing is built – it will help no-one if families find their homes are uninsurable because of where they are located.”

The Shoparound index, which is an average of the lowest three premiums quoted for each risk, surprisingly showed a small fall. “I think this is because some companies have been slow to increase premiums following the floods –it also shows that competitive pressure is still very strong.”

Home insurance at a glance

Average buildings insurance premiums rose 1.4% to £218.60 (£215.51 in previous quarter). The Shoparound premium, an average of the lowest three quotes for each risk, fell marginally to £144.07 from £145.66 (1.1%).

Average contents insurance premiums rose 0.4% to £150.57 (£149.99 in previous quarter). The Shoparound premium fell 2.8% from £84.96 to £82.56.