22nd January 2016
Premiums for home cover have been falling for three years, but they could be on their way back up.
Home insurance premiums could have hit the floor and be rising once again. There have been reports that three years of falling premiums came to an end in the fourth quarter of 2015, when they rose for the first time since 2011. There is a small increase of £2 (1.7%) in the average quoted premium for home buildings, contents and combined policies – the first since 2011. This puts the average policy cost at £108.59, which is still 1.4% less than 12 months ago.
Claims for homes ruined by the recent devastating floods are now expected to reach an estimated £1.3bn, of which about half is for domestic properties, while disruptive weather including sub-zero temperatures, snow and further wind and rain, are expected to add to claims over coming weeks. But this isn’t the main reason for rising premiums. The increase in Insurance Premium Tax (IPT) – introduced from 1st November – can be blamed for the hike, not flood damage. Home insurance premiums have been falling fairly steadily for four years. The trend appears to be continuing, albeit at a slower rate, if you take out the effect of the IPT increase.
Nevertheless, the recent flood claims appear to have slowed the fall in premiums and could lead to modest premium increases over the rest of 2016. Past experience suggests that claims in excess of £1bn in a single event would trigger a premium increase and for domestic property they currently fall short of that. And competitive pressure remains tough.