Home insurance premiums rising

The latest benchmark AA British insurance Premium index shows that a steady rise in the cost of buildings cover, that started in 2009, shows no sign of abating with an increase of 14.3% over the 12 months to the end of September, most of which happened during the first quarter of 2011.

The average cost of a contents policy also rose by 2.2% over the quarter to £77.21, a rise of 5.8% over 12 months. For combined buildings and contents cover policyholders can expect to be quoted on average, £205.55, a three-month increase of 1.5% and 5.7% over the year.

Simon Douglas, director of AA Insurance, said that the cost of buildings insurance has risen steadily for just over two years, after a long period of relatively little change. Even the devastating floods of 2007 didn't produce the big premium increases many predicted at the time, he pointed out.

"But since then, we've gone through two severe winters that caused widespread property damage throughout the UK. Insurers are also concerned about more frequent severe weather events such flash floods, often in places with no flooding history; wind damage and even damage from extreme hailstorms, lightning strikes and tornadoes. One recent industry report suggests that claims for storm damage have jumped by 68% over the past year.

"Insurers need to consider the potential for future claims and ensure that they have adequate reserves to meet the cost of any extreme and widespread weather damage: for example major flooding or more severe winters."

Douglas also pointed to building repair costs as well as contents claims which are rising with inflation, and this in turn is leading to premium increases.

"There has been a lot of focus on the sharp rises in car insurance premiums - yet over the past couple of years, the cost of insuring your home as been steadily rising too: and I believe they will continue to do so for the foreseeable future."