AA Index says the falling trend in home insurance premiums has come to an abrupt end
The falling trend in home insurance premiums has come to an abrupt end, blamed on a sharp increase in flood claims, according to the the AA's British Insurance Premium Index.
The Index shows that over the past quarter, the average quoted premium for home buildings insurance leapt by 3% – the largest single increase since the Index was launched in 1994. Home contents premiums also rose by more than 2% during the quarter.
The AA said the survey showed that six months of weather related claims have finally taken their toll on home insurance premiums.
John Close, Insurer Relations Director at AA Insurance, said: “We now see the result of that devastation reflected in premiums as insurers meet the cost of drying out and repairing homes as well as temporary re-housing of families while their homes were made habitable once again.”
“Some predictions that premiums would rise by 15% were overly pessimistic and, although I believe premiums will continue to rise as insurers dip into their reserves, I expect competitive pressure will keep increases affordable.
“One positive outcome seems to be that those who had no contents insurance are thinking again, with many insurers reporting increasing business.”
Despite the rises over the past quarter, John Close points out that both buildings and contents insurance have risen by less than 5% since the Index started in 1994.
Meanwhile car insurance premiums, which started rising during the second quarter of 2006, show no sign of easing.
The average quoted premium for an annual comprehensive car insurance policy rose by more than 1% while more than 3.5% was added to the average premiun for third party, fire and theft cover.
“The latest rises are in line with expectation,” says John Close. “Car insurance premiums have followed an upward trend since the second quarter of 2006. The cost to the industry of personal injury claims and legal costs has been escalating rapidly while accident damage costs have also risen faster than premiums. In addition, recent flood claims have cost insurers an estimated £100m.”
He added: “I’m concerned about the rising cost of TPFT insurance which reflects the tragic toll of accidents among young drivers so I support the Transport Select Committee’s proposal to increase to 18 the minimum age for holding a full driving license. The AA also believes teaching a responsible attitude towards driving should be part of the national curriculum.”
Close pointed out that male drivers under the age of 21 are ten times more likely and female drivers five times more likely, to be killed or seriously injured in an accident than those over the age of 35.
