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Car and home insurance premiums on the up

Paloma Kubiak
Written By:
Paloma Kubiak

Car insurance premiums have started to rise again but they’re “less than expected” while home insurance costs have also increased but remain “remarkable value for money”, said the AA.

The cost of a typical comprehensive car insurance premium rose to £568.48 over the second quarter of the year, a rise of 2.3% or £12.56, according to the AA’s latest British Insurance Premium Index.

That compares to a 0.4% fall over the previous quarter and a rise of 10.1% over the last three months of 2015.

However, in the year ending 30 June, the typical quote rose by nearly £84 from £484.86 – an increase of 17.2%, compared to the 20.7% rise over the 12 months to March 2016.

Regionally, Northern Ireland saw the biggest increase in premiums over the quarter at 7.8%, taking the average ‘shoparound quote’ – average of five cheapest quotes – to just over £800.

The cheapest premiums continued to apply in Scotland with an average price of £404,  a 2.5% increase over the quarter. The smallest increase was in Border/Tyne Tees where motorists saw a 1.4% rise, taking the average premium to £565.

Young drivers aged 17-22 who already pay the highest premiums saw the biggest jump in quarter two. The AA said this group saw £42 added to the cost of the typical £1,240.50 price of a policy.

At the opposite end of the scale, the smallest increase (1.2%) was for those aged over 70, taking the average policy price to £452.

It’s slightly better news for drivers aged 60-69 as this group attracted the lowest premiums of £349 with a 3.2% increase in cost.

Michael Lloyd, director of the AA, said premiums hadn’t risen by as much over the second quarter as some commentators predicted, though he expects the upward trend to continue over the rest of the year.

“The insurance industry continues to face many challenges. For example, increasing numbers of car owners shop around for their cover every year, especially at a time when premiums are going up.

“As more people look for introductory offers there is less incentive for companies to offer loss-making prices to attract new business that will, a year later, go elsewhere. So I believe this is one driver of recent premium increases while insurers are looking for ways to better reward customer loyalty.”

Home premiums up but £30 cheaper than in 2010

Home insurance premiums rose for the third consecutive quarter with £2 added to the average price of a typical combined buildings and contents policy, taking the price to £158.48.

Standalone policies also rose in the second quarter of the year according to the AA – 1.5% to £113.46, while contents cover jumped up 3% to £60.41.

Families living in properties built before the 1920s typically paid higher premiums compared with those in more modern homes.

A ‘shoparound’ quote for older houses, on average, increased by 1.6% to £187.77.

The biggest premium increase was for homes built after 2000 with a rise of 4.2%, though these homes still attracted the lowest premiums, typically £135.64.

Flats were the only property type to see a decrease in cost. A combined policy fell 1.8% to £171.41 while those living in detached properties saw a rise of 2.3% to £177.68.

The cheapest home to insure at the end of Q2 was a semi-detached at £145.69.

Regionally, it was cheapest to insure a property in the West and West Country (£148.11) while the biggest average increase was was Wales, which was also the costliest area to insure a home – up 1.8% to £167.15.

Lloyd added: “We have enjoyed a long run of generally benign weather – and while there have been some costly floods and damaging storms, they have been fewer and less costly than insurance companies expected.  As a result, premiums have been falling for some time but are now bouncing back from a historic low.

“Rising premiums I believe, reflect growing nervousness about potential severe weather claims which many climate experts predict.”