The average quoted premium for a combined buildings and contents insurance policy over the past 12 months has been reduced by almost £20, according to the latest AA British Insurance Premium Index.
And over the three months ending 30 September 2014, the average quoted premium for a home buildings policy fell by 3.1% to £112.56 (10.6% over 12 months); contents down 3.4% to £61.64 (7.3% over 12 months) and, for a combined policy, down 2.4% (11% over 12 months.)
The AA said the Shoparound average of the five cheapest premiums for each in a national basket of ‘customers’, typical of the UK property market, has fallen a little faster than the average of all quotes across the market, which has shown more modest falls.
Janet Connor, managing director of AA Insurance, said: “The falls continue a long-term downward trend which suggests that there are home insurance deals to be done for those shopping around for their cover.”
While flooding earlier this year made a big impact on headlines, it had no impact on premiums, despite predictions to the contrary.
“Overall, the weather has been relatively benign for the past couple of years, notwithstanding the February floods, which cost insurers around £450m compared with £3.3bn following the 2007 disaster.
“As a result, insurers’ claims costs have been lower than expected, meaning that business has continued to be profitable and has allowed reserves to be grown.
“This has translated into lower premiums.”
However, she points out that national averages hide regional differences and that homes at greatest risk of flooding are likely to have seen large premium increases.
All three of the main parties have recently confirmed their commitment to increased flood defence spending and implementing Flood Re, a national scheme designed to allow households at high risk of flooding to obtain affordable insurance cover.
Connor said that negotiation between the government and the insurance industry has been ‘tortuous’ and says she is disappointed that implementation appears to have been pushed back to at least November 2015.
On flood defences she said: “During February the Prime Minister said that ‘money is no object’ with regard to flood defence spending. Yet the £140m currently promised for flood alleviation investment is lamentably insufficient to keep pace with climate change which is expected to expose a further quarter-million homes to significant risk of flooding over the next two decades.
“Tens of thousands of homes are vulnerable and must benefit from flood defence spending, while those still prone to flooding should be able to obtain affordable home insurance with introduction of Flood Re.”
Connor doesn’t expect significant premium increases in the home sector unless there is serious flooding or storm damage over the coming winter. “Market average home insurance premiums are little different to when the AA’s Index was introduced in 1994 – in fact, the cost of a contents policy is a little less.
“The cost of cover has risen and fallen over the past 20 years, reflecting major weather events including severe winters and extreme flooding. And, taking inflation into account, it is significantly better value than ever.
“But if Flood Re isn’t properly funded and flood defence spending falls short, premiums for all households are likely to rise.”