Home insurance premiums fall

Sarah Davidson

October 22, 2014

In the three months to 30 September the average home buildings policy fell by 3.1% to £112.56, while this represents a 10.6% reduction on an annual basis.

The cost of contents insurance fell by 3.4% over three months and 7.3% over 12 months, averaging £61.64.

Janet Connor, managing director of AA Insurance, said: “The falls continue a long-term downward trend which suggests that there are home insurance deals to be done for those shopping around for their cover.

“Overall, the weather has been relatively benign for the past couple of years, notwithstanding the February floods, which cost insurers around £450m compared with £3.3bn following the 2007 disaster.

“As a result, insurers’ claims costs have been lower than expected, meaning that business has continued to be profitable and has allowed reserves to be grown.

“This has translated into lower premiums.”

She added that homes which have a greater risk of being flooded are likely to have seen larger premium increases.

Connor admitted she was disappointed with the ‘torturous’ negotiations between the government and the insurance industry for the national insurance scheme Flood RE, which have been pushed back until at least November 2015.

She said: “During February the Prime Minister said that ‘money is no object’ with regard to flood defence spending.

“Yet the £140m currently promised for flood alleviation investment is lamentably insufficient to keep pace with climate change which is expected to expose a further quarter-million homes to significant risk of flooding over the next two decades.

“Tens of thousands of homes are vulnerable and must benefit from flood defence spending, while those still prone to flooding should be able to obtain affordable home insurance with introduction of Flood Re.

“If Flood Re isn’t properly funded and flood defence spending falls short, premiums for all households are likely to rise.”

Sign up to our daily email