The beginning of 2016 in the home insurance market has already seen small increases in the average premiums for home buildings and contents insurance policies. The average cost of an annual buildings insurance policy has increased by £2.00 from an average price of £108.59 to £110.46, while contents insurance premiums has increased by a much smaller amount at just £0.41. The average for a combined policy has risen from £149.85 to £153.24, which doesn’t seem like much but is enough to stop the downward trend we’ve been enjoying over recent years.
Similar past disasters have triggered massive insurance claims in excess of £1 billion and it only takes one single weather event with a big impact to cause a premium increase for home insurance. The 2007 floods across much of the UK caused £3.3 billion in claims and premiums soared over the following year by a whopping 20%. On the other hand, the weather over the past 24 months has been kind to the nation and winters have been mild. This means that the coffers of insurance companies have not been too badly raided and they still have plenty of reserves left. This optimism caused some companies to reduce premiums and other insurers followed suit, further promoting the downward trend we had been enjoying.
After the 2007 floods, a special fund was set up in a joint agreement between the Government and the insurance industry, which is due to be launched in April this year. The fund will help people who own property in areas where there’s a high flood risk to purchase insurance they can afford. This will be funded by pushing up home insurance premiums across the board. So no matter what the rest of the winter has in store for the citizens of the UK, insurance companies are well prepared to support people whose homes have already been ruined, but the significant costs of these claims will ultimately put an end to the downward premium trend, which is not such good news for other home owners. Of course, a few £’s increase won’t break the bank for anyone, but if there’s another major weather disaster, things could become more serious for home owners and for the insurance industry alike.