All three types of home insurance policy have seen premiums increase over the past year, according to the AA. The motoring association also warned that house insurance premiums could soar even further if severe flooding occurs again this winter. Buildings cover is up 13.6% to £113, while contents insurance has increased 8.4% to £64 and […]
All three types of home insurance policy have seen premiums increase over the past year, according to the AA.
The motoring association also warned that house insurance premiums could soar even further if severe flooding occurs again this winter.
Buildings cover is up 13.6% to £113, while contents insurance has increased 8.4% to £64 and a combined buildings and contents policy has risen 6.1% to £158.
This means you could save around £17 by taking out a combined policy compared with buying two standalone policies from the same insurer.
But by shopping around, it can be a cheaper option to buy buildings and contents policies from different providers.
Michael Lloyd, the AA’s director of insurance, said: “Some commentators suggest that the home insurance sector is expected to begin showing losses as the year turns. Home insurance has become increasingly competitive as more customers shop around, particularly on price comparison sites.
“While this has tended to keep the lid on premiums, there is a cost in terms of commission paid by insurers whenever a policy is sold which may, paradoxically, lead to premium inflation. The Competition and Market Commission is currently consulting on comparison site pricing and the insurance industry, including the AA, is contributing to that process.”
Lloyd notes that claims costs – particularly contents claims – have been rising. The increase in insurance premium tax has also fuelled premium increases this year.
“I strongly urge the Chancellor to avoid penalising responsible home owners for protecting their property during the Autumn Statement,” he said.
And it looks like premiums are set to rise even higher. The AA said the industry is also bearing the cost of developing Flood Re – the not-for-profit fund owned and managed by the insurance industry.
Flood Re is designed to make home insurance available and affordable for those whose homes are in high flood-risk areas. Setting up Flood Re required government legislation and is the first scheme of its kind in the world and it is funded by a levy on the insurance industry.
“Fortunately, there have been no serious weather events for some time but, as winter comes on, that possibility can’t be ruled out. Widespread flooding or storm damage claims before the end of the year that exceed £1 billion would translate into sharp premium increases next year,” said Lloyd.
