Home insurance premium rises less than expected
Both buildings and contents home insurance premiums rose during the first quarter of 2011, according to the AA.
The Shoparound Index of the AA's benchmark AA British insurance Premium Index shows that over the first quarter of 2011, the average premium for an annual buildings policy increased by 2.7% to £147.29 (an increase of 13.6% over the 12 months to end March 2011) and for a contents policy, by 5.5% to £76.39 (an increase of 11.9% over 12 months).
The AA's Index analyses quotes from over 40 insurance companies, brokers and schemes against a basket of risks that is typical of the UK home owning population. The Shoparound premium is an average of the cheapest three quotes for each ‘customer'.
Simon Douglas, director of AA Insurance, says that home insurance represents very good value for money despite the steady rise over two years in the cost of buildings cover. He says that given record claims over the recent winter, he is surprised that premiums haven't increased more.
"During December 2010 alone insurers dealt with claims amounting to around £900 million for snow and ice damage and the AA's own experience saw a sharp rise in claims for burst pipes, ice damage to roofs and gutters and damage from melt water, compared with the previous winter.
"Given industry concern about the increasing severity and frequency of severe weather the premium increases we are seeing are quite modest, which is welcome news," he says, adding that the market remains competitive with discounts often given by insurers for combined policies.
He added that for many families who have been tempted not to renew their home cover, the winter will have brought an unwelcome reminder of the value of insurance. "Government statistics suggest that up to a third of households have no buildings or contents cover which, given that the average winter damage claim amounts to over £2,200 some families will have had unwelcome repair bills to meet out of their own pockets."
However, he warned that the impact increasing numbers of fraudulent claims, which some estimates suggest adds at least £44 to every household's insurance costs; as well as weather-related damage claims, is likely to lead to continued premium rises.
"Over the past two years, buildings insurance premiums have risen steadily but not spectacularly, unlike car insurance which has seen extremely sharp premium rises.
"Last year brought a number of flood claims in areas with little or no previous history of flooding, brought about by increased urban development and greater weather extremes.
"Insurers are concerned about this trend and are likely to seek to build their reserves to enable future claims to be met."