Premium hikes widely predicted for both car and home insurance because of increasing costs and the aftermath of last year’s flooding are not being realised, the latest benchmark AA British Insurance Premium Index reveals.

Home premium rises dry up

Home insurance premiums changed little over the first quarter of 2008.  The average quoted premium for buildings cover fell by just 42p to £208.51 and the Shoparound premium (an average of the lowest three quotes from each Index risk) fell by just 34p.

• “I expected the upward trend in premiums since last July’s flooding to continue,” Andrew Strong says.  “I believe the slight fall in average quoted premiums for buildings cover is explained by a rise in the number of risks not being quoted by some insurers, suggesting sensitivity to flood risk.”
• However, he emphasises that this does not mean families will find their homes becoming uninsurable. “It is more likely that insurers will want to know more - for example what flood protection measures are being taken by local authorities - before quoting, while an existing insurer will continue to provide cover following a flood.”
• Under the ABI Statement of Principles for the Provision of Flood Insurance* the industry agrees to insure flood-risk customers provided adequate investment in flood defences continues.  “But the Government shouldn’t take it for granted that the agreement will continue to be renewed indefinitely. It’s vital that proper investment is made to protect homes and businesses from flood risk and that careful consideration is given to the location of new housing stock.”
• He adds that although buildings insurance premiums increased last year to their highest point ever, they are still only 4.5 per cent higher than when the Index started in 1994: “Home insurance continues to offer remarkable value for money,” he says.

Home insurance at a glance

• Average buildings insurance premiums fell 0.2% to £208.51 (£208.93 in the previous quarter). The Shoparound premium, an average of the lowest three quotes for each risk, fell by 0.3% to £120.70 from £121.04
• Average contents insurance premiums rose 1.0% to £128.57 (£127.24 in previous quarter). The Shoparound premium rose by 0.3% from £70.08 to £70.29
• Average combined home and contents insurance quotes fell 1.4% from £297.19 to £293.11. The Shoparound premium rose by 0.3% from £183.31 to £183.80.