According to the latest benchmark AA British Insurance Premium Index, the cost of both car and home insurance appears to be levelling off, with welcome but small falls in the cost of cover for young drivers and for home insurance after two years of increase.
The Shoparound index for home insurance has seen premiums fall very slightly over the second quarter of 2011: a drop of 0.6 per cent for buildings cover to £146.35 and for contents a drop of 1.1 per cent to £75.53. However, the typical cost of a combined buildings and contents policy rose by 1.5% to £202.54.
The AA British Insurance Premium Index has been tracking the quarterly movement of both car and home insurance since 1994. It measures the market average premium (an average of all quotes on a UK-representative basket of ‘customers’) as well as the three cheapest quotes for each ‘customer’ to provide the Shoparound index.
Shoparound Index: Home insurance
|
Average Premium |
Jul-11 |
Apr-11 |
% Change |
Jul-10 |
% Change |
|
Buildings |
£146.35 |
£147.29 |
– 0.6% |
£130.93 |
+ 11.8% |
|
Contents |
£75.53 |
£76.39 |
– 1.1% |
£69.82 |
+ 8.2% |
|
Combined |
£202.54 |
£199.51 |
+ 1.5% |
£199.85 |
+ 1.3% |
Home buildings and contents premiums ease
The latest AA British Insurance Premium Index brings welcome news for home owners with a small fall over the past three months of just over £1, to £146.35, in the average cost of an annual buildings policy.
This follows a steady rise over the past two years that added almost 20 per cent to the cost of insuring a home. The cost of contents insurance also fell by a few pence over the quarter ending 30 June, to £75.53.
However, Simon Douglas, director of AA Insurance, doesn’t believe that this will mark the start of a sustained fall in premiums, pointing out that home insurers are suffering increases in both the cost of severe weather claims as well as fraud.
“While we can do little about the weather, the creation of a new Police Fraud Unit should help insurers to significantly improve detection and prosecution of insurance fraud,” Mr Douglas says.
“The number of people attempting to make claims for losses that are grossly exaggerated or non-existent has risen sharply, according to the Association of British Insurers.
“We need to persuade those thinking of swindling their insurer to think twice. After all, those who are caught falsifying or exaggerating claims will find it difficult to obtain cover from any other insurer because the industry is also getting better at sharing data about those attempting fraud.”
Insurers continue to be concerned about future extreme weather damage and flash flooding. The freeze in December turned out to be very expensive for insurers, covering as it did so much of the country and over such a long period.
Meanwhile the industry has been meeting Defra officials to consider the best ways to provide insurance protection for those homes that are most at risk of flooding.
“This will become particularly important after the current ‘statement of principles’, that ensures homes in flood-prone locations can continue to get insurance protection, comes to an end in 2013,” Mr Douglas points out.
“The industry is keen to continue building reserves for future severe weather events and I believe that premiums may need to rise further.
“The competitive market has ensured that home insurance remains remarkably good value for money. After all, the cost of contents cover has risen only by 8.5% over 17 years while buildings cover has risen by 34% over the same period – even that is well below inflation.” Mr Douglas says.
“My concern is that insurers may be faced with more regular, extreme weather events. If that happens, then current premium rates will not be sustainable and premiums might have to be brought sharply into line.”
Further data is available on age and gender by calling Ian Crowder on 01256 492 844 or ian.crowder@theAA.com
