HOME INSURANCE
PREMIUMS RISING,
ACCORDING TO AA
INDEX
Washout summer
brings home
insurance premium
increases
AA
urges Government to
make flood defence
investment a
priority
The latest benchmark
AA British Insurance
Premium Index shows
that over the third
quarter of 2012, the
average insurance
quote for both home
buildings and
contents cover has
risen following a
washout summer of
storms and flood.
According to the
Shoparound summary,
which is an average
of the five cheapest
quotes for each
property in a
country-wide basket
of risks, the cost
of a buildings cover
rose 2.4% to £181
over the three
months to the end of
September (5.2% over
12 months), while
contents cover rose
1% to £242 (7.2%
over 12 months).
Simon Douglas,
director of AA
Insurance, says that
the wet summer,
which according to
the Association of
British Insurers has
cost insurers in
excess of £400
million, is a sharp
reminder that the
industry must be
prepared for more of
the same over coming
years.
The Environment
Agency predicts that
heavy rainfall will
become three or four
times more common
over coming decades,
increasing flooding
tenfold. Meanwhile,
the Climate
Vulnerability
Monitor, a report on
the worldwide
effects of global
warming published in
September, suggests
that the cost of
flood damage in
Britain is likely to
triple by 2030.
“I am very concerned
that no agreement
has yet been reached
in finding an
affordable option to
the ‘statement of
principles’ between
the insurance
industry and the
Government, which
ensures that
families in
flood-prone
properties can
continue to obtain
flood cover. This
expires in June next
year and if no
agreement is reached
soon, could lead to
the most vulnerable
homes becoming
uninsurable.
“To put this into
context, insurers
measure flood risk
in terms of events
likely to happen
over a period of
years. Even if a
home is at risk of
flooding once in a
century, given that
the average cost of
repairing a
flood-damaged
property is £20,000
that is the
equivalent of £200
per year, on top of
the cost of covering
other risks.”
Mr Douglas points
out that flooding is
extremely costly in
terms of damage to
infrastructure and
disruption to the
economy, as well as
to families’ homes;
yet investment in
flood defences has
also fallen by more
than 20%.
“It’s vital that the
Government and local
authorities make
tackling the problem
at source by
investing in flood
defences a priority.
“It’s hard to think
of a better return
on investment.”
Mr Douglas points to
the £38 million that
was spent on flood
defences in Carlisle
following
devastating floods
there in 2005. Last
month, although some
properties in the
region were flooded
following
exceptional
rainfall, the new
defences kept around
1,500 homes in the
city dry.
“That represents a
return of at least
100% in terms of the
cost of mopping up
and damage to
property that has
been saved.”
Regional
trends – Shoparound
Index
Buildings
Every region of the
UK has seen premiums
rise. The most
expensive region to
insure a home is
London and the South
East, with an
average buildings
premium of £200, an
increase of 2.9%
over the quarter.
The biggest
regional premium
increases were
Yorkshire and East
Anglia, which saw
premiums jump 3.5%
to £177. Wales and
the West Country
remain the cheapest
region to insure a
home with an average
quoted premium of
£157, up 1.1% over
the quarter.
Contents
The highest quoted
Shoparound premium
for contents cover
is in the Central
and North West
England with at an
average of £101, an
increase of 0.7%
over the third
quarter of 2012,
marginally higher
than Yorkshire,
which saw premiums
rise 0.9% to £100.
In Wales, the
average Shoparound
quote for contents
insurance fell 0.6%
to £84. The
cheapest regions to
insure home contents
are Scotland and the
West Country, each
£79.
Home Insurance
premium movements:
Shoapround Index
Direct -
Shoparound
Summary |
Average
Premium |
Oct-12 |
Jul-12 |
Percentage
Change |
Oct-11 |
Percentage
Change |
Buildings |
£181.48 |
£177.27 |
2.4% |
£172.51 |
5.2% |
Contents |
£92.84 |
£92.14 |
0.8% |
£89.86 |
3.3% |
Combined |
£242.42 |
£239.91 |
1.0% |
£226.20 |
7.2% |
|