Why home insurance premiums are going up?
The cost of home insurance in the UK has seen a significant increase in recent months, primarily driven by the impact of severe weather events and rising costs of materials and labor for repairs.
Key Points
- According to the Association of British Insurers (ABI), the average combined home insurance premium (buildings and contents) was £375 in the first quarter of 2024, a 19% year-on-year increase from the same period in 2023.
- This surge in premiums is largely attributed to the costly damage caused by storms Babet, Ciaran, and Debi between October and November 2023, resulting in £573 million in weather-related claims paid by insurers, the highest on record.
- The rising cost of construction materials and labor needed for repairing and rebuilding damaged homes has also contributed to the increased cost of settling claims, with the total value of claims paid by insurers jumping by nearly 10% to £2.55 billion in 2023.
- Comparison site data shows even higher premium increases, with Consumer Intelligence reporting a 40.6% year-on-year rise in quoted premiums as of January 2024, and Compare the Market recording a 31% increase in the first quarter of 2024 compared to the same period in 2023.
- Properties that have previously flooded are facing significantly higher premiums, with an average increase of 117% compared to homes without a history of flooding, according to Compare the Market data.
- The ABI notes that while the rise in combined premiums over the past year remains below the inflation rate, the cost of many building materials has increased above inflation.
Impact on Household Budgets
The substantial increase in home insurance premiums adds further strain to household budgets already grappling with the rising cost of living. Homeowners, especially those in areas prone to flooding or severe weather events, may need to reassess their budgets and explore ways to mitigate the impact of higher premiums, such as shopping around for better deals or increasing voluntary excess to reduce costs
Sources
What’s happening to home insurance premiums? - Which? News
Prices up by almost a fifth thanks to last year’s storms
Below inflation rise in the cost of home insurance despite a year of turbulent weather and rising building material costs | ABI
Despite surges in weather related claims and more expensive building materials, the average price of combined home buildings and contents insurance rose by less than the rate of inflation over the last year, according to the Association of British Insurers (ABI) Home Insurance Premium Tracker.
The household bills you’ll pay as a homeowner - Which?
Discover the household bills and maintenance costs you need to budget for when you buy your first home