3 July 2018 – Home insurance costs have jumped by 21% over the past two years, according to new research by Compare the Market, following hikes to insurance premium tax and the introduction of Flood Re. The latest data from April indicates that the average cost for buildings and contents insurance stands at £161 per year, rising from £133 in April 2016.
In its latest analysis of home insurance costs across the UK, Compare the Market has found that premiums have been steadily increasing over the past two years, as increases in insurance premium tax (‘IPT’) have been steadily hiked by the Government from 6% to 12% over the past three years.
The impact of Flood Re, the government-backed reinsurance scheme designed to ensure that insurers can provide affordable cover to homes in areas with a high risk of flooding, has also driven up premiums. While the system provides much needed home insurance cover to many that could not afford it, the system effectively spreads the cost of insuring these houses which means that insurers need to increase premiums across the country to subsidise the at-risk homes. The cheapest premiums available to households across the UK have also risen significantly over the past two years, increasing to £141 on average from £118 in April 2016, meaning that the cost of auto-renewing an insurance policy is around £23.
It looks like the trend in rising premiums is set to continue and the 'Beast from the East' storm earlier this year is likely to be partly to blame. Data from the ABI reveals that for the start of this year, weather claims increased by 290% compared to the end of 2017, with costs rising from £93m to £361m. The 'Beast from the East' also contributed to a rise in the total cost of property claims in the first quarter of the year as costs significantly increased from £917m to £1.246bn – the highest since the first 3 months of 2016. Unfortunately, this could hit customer’s pockets as insurers may look to offset these increased costs by increasing premiums.