Home insurance premiums fall for third straight quarter
- Latest data shows the average price of combined buildings and contents insurance stood at £141.12 in the first quarter of 2021 (Jan, Feb, Mar)
- While premiums remain relatively high, three quarters of decline have seen them fall to their lowest point since Q2 2019
- Buildings-only policies cost an average of £110 while contents insurance stood at £61
Home insurance premiums dropped slightly in the first quarter of 2021 – January, February and March. The average price of combined buildings and contents insurance stands at £141 having decreased each quarter since Q3 2020. Despite this downward trend, prices are only 3% cheaper than at their peak (£146) in Q2 2020.
The average price of combined buildings and contents
In Q1 2021
Home insurance premiums are showing some signs of decline, while remaining close to their highest point since 2013.
At the end of 2016, the typical cost of an annual combined buildings and contents policy was just under £116*. By mid-2020 this had increased steadily to £146, but since then prices have start to fall at an increasing rate – 0.1% in Q3 2020, 1.2% in Q4 2020 and now 2.1% in Q1 2021.
This is the first time that prices have dropped for three consecutive quarters since Q3 2016 to Q1 2017.
*From October (Q4) 2018 onwards the on screen price also includes add-ons in line with IDD, as such it may not be accurate to compare figures pre and post this date.
Building and contents as separate policies
Buildings-only policies have also fallen every quarter since Q3 2020, although they remain higher than at this point in 2020. Year-on-year, average prices have risen by 0.3%, from £109.48 to £109.86.
Contents-only premiums saw the most significant decrease in Q1 2021, dropping from £64.52 to £61.48 (-4.7%). This also represents a year-on-year decline of 5.3%, down from £64.95 in Q1 2020.
Combined policies often do not reflect the changes in separate buildings and contents policies, because insurers often provide a premium discount to customers who buy both elements together.
Why have premiums fallen?
Restrictions during the pandemic mean fewer house burglaries and a reduction in common ‘escape of water’ claims (with people at home to detect leaks before serious damage is caused). Fewer claims means that insurance is more profitable and can lead to reduced prices.
Some experts also suggest that competition in the home insurance market is increasing, which leads to insurers lowering premiums to attract customers.
However, these reductions will be partially offset by other effects of lockdown. Many people are spending increased periods at home – working, schooling, doing DIY and even exercising – so the rate of accidental damage is likely to have been much higher than usual – and more claims spell higher costs for insurers.
Home insurance premiums over time
What about movement in premiums over the next year?
We are facing an uncertain time ahead with potential triggers for both increases and falls in home insurance costs.
Prices will continue to be influenced by the pandemic, with lockdown measures playing a part in dictating the frequency and severity of claims. We may therefore begin to see some shifts in pricing as restrictions begin to ease.
Additionally, competition for customers is likely continue for much of the year – with insurers looking to grow their market segment - which could lead to a continued, if moderate, decline in premiums.
What about in the longer term?
The FCA are due to introduce new regulations which mean insurers must offer the same prices to both new and existing customers. These changes may lead to higher prices for new customers and lower prices for customers that remain with the same supplier.
Some of the issues around climate change point to longer-term increases in home insurance premiums.
A rise in weather-related claims will apply upward pressure on premiums. For example, the early part of 2020 saw a number of severe storms, including Dennis and Ciara – this resulted in in flooding across many areas including south Wales, Herefordshire, Shropshire and Worcestershire. There could be more in store this year and in the coming years.
The best way to avoid rising costs of home insurance is to shop around every year, so you can take advantage of the lower prices on offer through MoneySuperMarket.
Home insurance premiums over time
““We are starting to see prices decline, and this is a trend that experts think is likely to continue over the coming months. Lockdown has led to fewer claims and extra competition for customers, and both generally mean lower premiums.
“Prices remain high, however, and the easing of restrictions may lead to more claims, which could push prices in the other direction. It’s therefore crucial for consumers to take matters into their own hands and shop around for the cheapest home insurance premium at every renewal.” ”
Average premiums by region
- London retained the most expensive combined home insurance premiums in Q1 2021 at £201.09, despite the biggest decrease (-3%)
- Those in the North East pay the least on average, with combined premiums of £117.38
- Burglary is more of a problem in urban areas, which is one reason why London has higher premiums than other parts of the UK. Parts of south-east England, including London, are also prone to subsidence
Bigger towns and cities tend to have higher crime rates, which can contribute to higher costs.
The area where you live is one of the biggest factors when it comes to calculating the cost of home insurance. Insurers set prices according to the likelihood of claims from fire, flood, subsidence and burglary, for example, using the number of related incidents in any given postcode.
Insurers are also concerned that climate change will trigger more frequent and more violent bouts of extreme weather, leading to floods, storms and associated damage. Any reductions in rainfall over the long term may also lead to an increased number of subsidence claims. Particular areas of the country are more prone to flooding or subsidence, for example.
As far as belongings are concerned, the biggest perceived risk on a day-to-day basis is burglary. This is more of a problem in urban regions, which is one reason premiums are much higher in London compared to other parts of the UK.
How property type affects home insurance costs
- People living in flats or apartments pay the highest premiums on average* for combined buildings and contents insurance, at £147.71
- The cheapest premiums on average apply to those living in a bungalow, at £128.11 for buildings and contents insurance
- 70% of people who live in a flat or apartment buy contents insurance only. Buildings insurance in such circumstances is often the responsibility of the leaseholder or landlord
The type of property you live in can make a big difference to your risk profile from an insurer’s perspective – and this might push up the cost of your insurance.
Properties with shared access can be more susceptible to break-ins, for example, while homes that are attached to each other, such as terraced houses and properties subdivided into flats, can be more at risk of damage by spread of fire or leaked water.
Those living in flats and apartments with shared access typically pay higher premiums for combined insurance (buildings and contents), at an average £147.71.
The average premium for a house stood at £143 in Q1 2021, while bungalows saw the lowest premium by property type in the quarter at £128.
The good news is all households can save money on their home cover by shopping around at renewal.
*excluding ‘other’ properties such as bedsits and halls of residence for which there is low volume
All premium price data is based on the median cheapest on screen price for the given period that customers see when running a quote. Premiums are therefore based on MoneySuperMarket customers only and are representative of the UK average.
From October (Q4) 2018 onwards the on screen price also includes add-ons in line with IDD, as such it may not be accurate to compare figures pre and post this date.