According to its latest research, the average quoted premiums for buildings, contents and combined policies all fell over the three months ending 30 September 2015, continuing a fairly steady downward trend that began at the end of 2012.
The average quote for buildings policies fell by 1.4% to £107.39 (down 3.1% over the year), contents policies fell by 2.1% to £60.00 (down 5.6% over the year) and combined buildings and contents policies fell by 2.4% to £149.30 (down 6.3% over the year).
Janet Connor, managing director of AA Insurance said that while this continues to be welcome news for customers, premiums are now artificially low.
She said:
"The cost of home insurance is now little more than that quoted when the AA’s Index started in 1994.
“The past couple of years have seen very few serious weather claims – mild winters and little serious flooding or property-damaging storms. That has led to the continuing easing of premiums as competitive pressure builds.
“Even Mark Carney, Governor of the Bank of England has warned insurers and investors to wake up to the issues while the Prudential Regulation Authority has published a report identifying potential climate risks for the UK insurance industry.
“Some weather forecasters suggest that the coming winter could be particularly harsh which would bring the severe weather claims it would imply. If that happens, then equally sharp home premium increases can be expected.”
Meanwhile, Flood Re – the Government-supported scheme that will enable home owners in locations most at risk of flooding to obtain affordable cover – is expected to be launched in April 2016.
Janet Connor said that "this has been a long time coming", adding:
“Although there are industry concerns about how effective it will be and the impact it might have on premiums for everyone, it will be welcomed by those whose homes are difficult or costly to insure. The real test will be if there is widespread flooding similar to 2007, which cost insurers over £3bn in claims.”
