Home insurance costs ‘bottomed out’ as they start to rise
The average cost for a new combined home buildings and contents policy is now £157.27.
Standalone buildings cover rose by 7.6% over the year to £114.43, while the cost of contents was up 3.5% to £60.69.
Regionally, Scotland has benefited most over the last quarter of 2016 with the average quoted premium falling by 1.1% to £150.40. However, the cheapest region to insure a property is the West and West Country, despite a rise in premium of 0.3% to £146.58. The most expensive region to insure a property is London and the South-East, which saw quoted premiums rise by 0.5% to £165.93.
On the up
According to The AA the increased costs are partly down to flood claims as well as the launch of FloodRe in 2016. It said rates have now “bottomed out” and have started to increase.
Michael Lloyd, The AA’s insurance director, said: “2016 was a year when home insurance was not far from the headlines. It began with more than 16,000 homes flooded while in April, Flood Re, the government supported, industry-led and financed scheme to deliver affordable home insurance for households at flood risk, was launched.
“Insurance Premium Tax (IPT) also increased to 10% from October and will rise again to 12% in June 2017.”
Lloyd believes that the rises in the cost of buildings cover – albeit little more than a £1 added to the average Shoparound quoted premium – and of combined policies over the quarter, suggests that premiums have reached the bottom.
“A report by analysts Ernst & Young last year suggested that 2017 will see home insurers making underwriting losses as costs of claims including managing fraud overtakes premium income. Insurers have been using their reserves to help stay competitive which is unsustainable in the longer term.”
He added that uncertainty about the longer-term impact of Brexit could also mean continued premium increases.