Home insurance premiums 'stay low'

Although it charted a rapid rise in the cost of car insurance premiums to record levels, the AA Insurance British Insurance Premium Index has revealed that home insurance premiums fell during the second quarter of 2007.

The insurance provider's research indicates that average indexed premiums fell slightly for both buildings and contents insurance polices, as heavy discounting cancelled out recent small increases and reflected the "continuing competitive market for home cover".

During the first three months of 2007, the index of average quoted premiums for buildings cover fell by 1.89% to £206.88, enlarging the year-on-year reduction in premiums to 0.20%. The 'Shoparound premium', an average of the lowest three premiums on the market for each risk category in the index, fell by 3.45% to £135.72.

Similarly, home contents cover saw a 1.32% reduction in the index of average quoted premiums, which fell to £147.14. In this highly competitive market, competitively priced quotes drove premiums to a 3.22% reduction year-on-year, while the Shoparound premium fell by 3.37% to £81.80.

Kevin Sinclair, managing director of AA Insurance, said: "Home insurance represents particularly good value having changed little over the past decade. Things have never been better for customers in terms of choice but make sure you're comparing like for like and not just price for price."

Impact of elevated flood risk on premiums

The recent flood activity around the UK has prompted fears among homeowners that home insurance premiums could climb swiftly as insurance providers re-calculate their weather based risk assessments.

Environmental risk management firm Ambiental claimed that insurance companies will consider removing flood cover as standard from their fire policies if the government fails to significantly increase funding for flood defence.

The Association of British Insurers, meanwhile, has placed increased pressure on the government to develop an effective strategy to cope with future climate change by publishing a climate change 'adaption manifesto' which calls for immediate action.

However, Mr Sinclair said it was unlikely that the recent widespread flooding would signal an immediate increase in home insurance premiums.

"It will take a sharp increase in the number of extreme weather events of the sort we have seen in Yorkshire and the Midlands to have an impact," he said.

"But I am concerned at the number of people counting the cost of the recent floods who say they had no contents cover while many industry experts believe that up to two thirds of those who do have cover are under-insured.

"Recent events show that severe weather can affect anyone, so while premiums remain low, it would be a good time for people to review their home insurance."

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