If you saw the AA’s British Insurance Premium Index report on car insurance premiums earlier today (see
article) then you may have thought there were no silver linings among the insurance premium clouds.
However, statistics relating to home insurance suggest there is some positivity to enjoy after all.
According to the benchmark AA British Insurance Premium Index, the typical quoted premium for a combined buildings and contents policy actually dropped by 12.2% last year – although there was a climb in the final three months of the year, albeit just by a few pence, rising from £156.76 to £157.27.
Meanwhile, standalone buildings and contents policies have also fallen over the year – the shoparound quoted premium for buildings cover stood at £114.43, representing a 1.7% decrease over 2016; while contents cover stood at £60.69, dropping 10.7% during the year.
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The positivity comes despite a series of events that thrust home insurance into the spotlight over the last year including 16,000 homes being flooded in April and announcements of increases to insurance premium tax. As such, Michael Lloyd, the AA’s insurance director, believes the falls are unlikely to continue much longer.
“Despite these pressures, competition has kept premiums down but, in my view, this cannot last much longer,” he said.
“Home insurance isn’t subject to the same kind of pressures faced by motor insurance – such as whiplash injury claims.
“A report by analysts Ernst & Young (E&Y) 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 also points to uncertainty about the longer-term impact of Brexit, including a weaker pound and poorer insurer investment returns as interest rates remain at a record low.
“All this points to the likelihood of premium increases,” Lloyd said.
Related stories:
Car insurance premiums soar to four-year high
Whiplash reforms: the insurance industry reacts
