Home insurance costs keep on falling

home businessHome insurance costs have dropped for 18 months in a row, but insurance firms are bracing for a flood of bad weather claims in an expected bad winter.

Britain is already tidying up in the wake of St Jude’s Storm, which left a trail of damage and four people dead.

The concern is more storms will follow and that many areas will be submerged by flood water that will trigger claims of millions of pounds.

Insurers explained prices are falling because the number and value of claims has dropped, but several weeks of severe weather could reverse the price falls.

According to the AA, the cost of buildings cover has reduced by 0.8% over the past three months and down 5.8% to an average £129.44 a year for the 12 months ending September 30, 2013.

Contents cover has seen a similar drop in prices – to £69.28 a year. That’s a reduction of 1.8% in Q3 2013 and 3.8% year-on-year.

Combined policies offering building and contents cover now cost an average £127.86, following the trend by decreasing 1.7% in Q3 and 6.6% over the year.

The AA’s Simon Douglas said: “We are in a competitive market and rate reductions are still made but in the longer term, major flooding for example could lead to sharp premium rises, particularly for buildings cover.

“This is what happened after the 2007 floods.  Otherwise, I believe that home premiums will continue to offer good value for money.”

Douglas also explained insurers were concerned about a new agreement between insurers and the government to provide flood insurance cover to homes.

The old agreement, which expired in June, offered cover to businesses, but the new pact does not.

“The measures proposed appear complex and onerous for insurers.  There are also controversial exclusions such as small businesses including bed and breakfast premises which, after all, are also homes for their owners and the exclusion of properties built after 2009,” he said.

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