Insurance market research firm Consumer Intelligence has stated that insurance premium tax rises are driving up the cost of home insurance pushing average annual premiums up 1.8% to £124.
However, the firm is warning more price rises are on the way as the weak pound drives up the cost of repairs and another Insurance Premium Tax rise takes effect in June.
Its data – which is used by the Office of National Statistics to calculate official inflation statistics – shows the last Insurance Premium Tax rise in October is one of the main reasons for the increase in the year to January.
The quarterly Home Insurance Price Index shows premiums are rising fastest for over-50s who have seen increases of 3% in the past year to £128 compared with increases of 1% for under-50s.
Home insurance customers in the East of England are experiencing the highest increases in premiums with average rises of 4.3% in the past year. Londoners have seen prices fall over the year but still pay the highest premiums at £147.
Analysts warn that the weakness of the pound since the EU Referendum is having an impact on building material costs which will increase the cost of repairs and premiums depending on which contractors insurers use.
However, customers can take comfort from the fact that home insurance costs are still 7.8% lower than in February 2014 when Consumer Intelligence first analysed data.
John Blevins, Consumer Intelligence pricing spokesperson, said: “The rise in home insurance costs over the past year may just be the beginning once the impact of the weak pound and the next Insurance Premium Tax rise kick in.
“The impact of sterling’s post Brexit slide will feed through from increased costs for building materials and equipment increasing the cost of claims which are the biggest influence on premiums.
“However the impact will vary from insurer to insurer depending on the contractors they use. Competition for business remains intense, so shopping around remains important as there are plenty of insurers who want your business.”