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Home insurance premiums continue to increase

14th October 2010 Print

Home insurance premiums continue to increase, according to the latest AA British Insurance Premium Index.

Over the year ending 30th September, premiums for both buildings and contents rose significantly, the cost of contents cover showing the biggest jump since the Index started in 1994.

Although premiums moved little over the third quarter of 2010, the year ending 30th September has seen the typical cost of a buildings policy rise by 7.5 per cent to £133 and for contents, a record 14.9 per cent to £73.  The cost of a combined buildings and contents policy rose by 6.7 per cent over the year to £194.

This is according to the Shoparound index, which is an average of the cheapest three quotes for each ‘customer' in the Index basket of risks.

The Shoparound premiums contrast with the market average for all quotes for each ‘customer' in the Index basket of risks, which showed modest falls or no change in premiums, suggesting that many insurers can no longer afford to offer cheap deals or special offers.

Prices quoted on price comparison sites showed similar increases.

Simon Douglas, director of AA Insurance, points out that over the years home premiums have moved little but increases have been more pronounced over the past two years. 

"I believe this reflects growing concern amongst insurers about the effects of climate change and the risk of flooding that many UK households face. 

"With the Government spending review about to take place, I'm particularly concerned that investment in flood defences is not affected.

"The AA has called on the Government to keep its commitment to investment in flood defences reduce the risk of future major floods like those at Cockermouth and Tewkesbury.   If spending on flood defences is reduced, it puts thousands of homes at risk of being unable to insure their homes or obtain mortgages."

He adds that insurers are dealing with an increasing number of properties damaged by extreme weather and flash floods, often in places that have no previous history of flooding.  "Violent weather is likely to become more frequent in future and insurers must prepare for it and inevitably, insurance premiums will rise."

He also suggests that recent premium increases can in part be accounted for by the large number of claims following the most severe winter for decades. "Many properties suffered burst pipes in the freeze while ice and snow damaged roofs and gutters, prompting a surge in claims."

However, he says that home insurance remains good value for money.  "But it is important to ensure that when you choose your it, don't do so on price alone - check what cover is offered to make sure that in the event of a claim, it does what you expect it to do."