Home insurance costs showed little movement towards the end of 2012, although industry experts fear prices may start to rise again over coming months.
In the last three months of 2012, buildings cover went up 0.2% to an average £176 per year and contents rose 0.5% to an average £90.
The cost of combined home insurance dropped 0.6% to around £230, says the latest survey of the market by The AA.
But although some insurers may offer bundled bargains, AA insurance director Simon Douglas is warning that massive price rises may be on the way to bail out companies reeling from more than a £1 billion of bad weather claims in 2012 that have yet to work their way through to customers.
“The year ended with widespread floods and there are diverse views in the market on how much effect they will have on premiums,” he said.
“Home insurance has certainly performed better than the car insurance sector. While the number and severity of weather-related claims has been increasing, events during 2012 have not been on the scale of the 2007 floods.”
Different insurers are considering various ways to deal with extra bad weather claims as they believe climate change is here to stay indefinitely and will result in more freak cold weather and floods.
Some are building a cash reserve to meet the costs of future significant claims, but other insurers believe rates are already taking this into account, Douglas explained.
“As recent severe weather claims come in, coupled with the January snowfalls, I believe premiums are likely to rise in the early part of the year,” he said.
For homes that have already been hit by flooding, they could find that the excess on flood claims rises more sharply than their premiums, the AA predicts.
Whatever the weather, motorists and home owners will pay the price in higher insurance – as the cash reserves come from their premiums.
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