Insurance premiums won’t be affected by Storm Desmond

Christina Hoghton
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Christina Hoghton

An across-the-board rise in home premiums is unlikely, despite the huge payouts following the recent flooding in Cumbria

Home insurance premiums have been falling steadily for four years, according to AA Insurance’s benchmark British Insurance Premium Index.

Nearly £50 has been wiped off the typical Shoparound quote for a new combined buildings and contents policy from £191.83 at the end of 2011 to £149.30 today.

The broker expects premiums during the fourth quarter to again show a modest fall, despite serious flooding following Storm Desmond in Cumbria, expected to result in home insurance claims of around £250m.

Some commentators have suggested that the payouts could lead to a widespread rise in premiums, but Mike Lloyd, director of AA Insurance, disagrees, stating that claims in excess of £1bn would be necessary to trigger across-the-board increases.

He explained: “The UK hasn’t suffered a severe winter since 2010 and although there have been flooding events (such as February 2014), none have been anywhere as severe as the 2007 disaster which cost insurers around £3.3bn.  Following that widespread damage our Index, which has been tracking the quarterly movement of home insurance premiums since 1994, showed that the average quote for cover rose by around 20% over the following year.

“And while benign weather may have triggered premium falls in the first place, the continuing downward momentum now has more to do with competitive pressure.

“Insurers have sufficient reserves to meet claims such as the recent flooding and, although those affected will sadly expect to suffer premium and/or excess increases, insurers will stay with them as the heart-breaking rehabilitation process progresses.  On the whole, insurers and brokers including AA Insurance have responded well to calls for help from customers.

“But we don’t expect average premiums overall to be affected.”