Home insurance premiums easing

The latest benchmark AA British Insurance Premium Index of home insurance premiums recorded a small quarterly rise in the average quoted premium for an annual buildings insurance policy, which now stands at £213.32, about £3 or 1.8 per cent higher than the previous quarter.

Since the flooding of July last year, the average premium quoted for buildings cover has risen by only about £13, or 6.7 per cent, considerably less than some commentators predicted.

However, average quoted premiums for both contents and combined (buildings and contents) insurance fell. Contents premiums dropped by nearly £5 or 4.2 per cent over the past quarter while £6 (1.9 per cent) was wiped from the average quoted premium for combined buildings and contents policies.

The Shoparound index, which is an average of the lowest three premiums quoted for each of the 750 home insurance risks in the Index and a better measure of what buyers would pay after shopping around, fell over the quarter for all three types of home policy. The Shoparound premium for buildings cover dropped by 2.2 per cent to £123.47; for contents by 3.8% to £69.66 and combined by 3.6 per cent to £185.94.

Simon Douglas, director of AA Insurance, says: "I expected both buildings and contents cover to continue their upward trend so I am a little surprised that the Index is showing these falls.

"However, home insurance has become an extremely competitive market with some compelling offers over the past quarter and the quoted premiums reflect that.

"We have also seen some insurers looking carefully at which risks they are willing to cover or are asking customers to refer for a bespoke quote, particularly those in areas where claims for flooding or theft are most likely and premiums would therefore be high. At the same time, we're seeing premiums reducing for safer risks and this has had an effect on the Index result."

Simon Douglas points out that although flood risk and other consequences of climate change continue to concern insurers, there is considerable competition for new business which helps to keep premiums in check.

He adds: "For most people, home insurance continues to offer remarkable value for money as average premiums are little higher than they were when the AA Index began in 1994."