Home insurance premiums continue upward trend
- Latest data shows average price of combined buildings and contents insurance stood at £144.48 at the end of 2019
- Premiums have risen compared to a year ago, adding £3.91 to an average policy, although the rate of increase has slowed
- Buildings-only policies at the end of 2019 were an average of £108 while contents insurance stood at £66
Home insurance premiums in the fourth quarter of 2019 leapt by 2.78% on the same quarter the previous year. The average price of combined buildings and contents insurance stood at £144 at the end of 2019, with weather-related claims fuelling premium increases during the 12-month period.
The average price of combined buildings and contents
In Q4 2019
Home insurance premiums have been rising steadily in recent years, but the rate of increase slowed in 2019.
At the end of 2016, a typical combined buildings and contents policy cost under £115. At the end of 2019, the price was £30 higher – an increase of 26% in just three years.
But the good news is that the rate of increase year-on-year appears to be slowing. In 2017 premiums for the typical combined policy rose by 9% while in 2018 there was a leap of 12.45%, but in 2019 the figure was just 2.78%. What’s more, the price stabilised across the third and fourth quarters of 2019, actually falling by 18 pence in Q4.
Buildings-only policies have seen sharp premium increases, however. Year-on-year, average prices have rocketed by 9.46%, from £99.11 to £108.49. The increase from Q3 to Q4 was 1.87%, from £106.50 to £108.49.
Year-on-year, contents-only policies increased by 3% (£1.93) from £64.25 to £66.18, with a 0.75% rise (49 pence) from Q3 to Q4.
Combined policies cost less than separate buildings and contents policies because insurers provide a discount to customers who buy both sorts of cover from them.
Home insurance premiums over time
The decline in the rate of price increase in the latter quarters of 2019 does not mean that inflationary pressures have disappeared from the home insurance market. Weather-related claims are responsible for the lion’s share of premium increases, and insurers are expecting the UK’s weather to become more extreme as a result of climate change.
This, they say, will result in more claims which in turn will feed through into higher premiums.
The specific threats associated with the weather include flooding (which triggers claims on both buildings and contents policies), storm damage and subsidence (which both lead to buildings policy claims).
In November 2019 there were many instances of flooding across the Midlands, in Lancashire, Yorkshire and Humberside, and in the south and south west of England. Given that it can take weeks and even months for flooding claims to be resolved, we may see premiums increase in 2020 as a result of these incidents.
Those living in the affected areas will see their prices rise by the largest amounts, but the national average is also likely to creep up as insurers seek to balance their books and reflect the increased weather risks we are all deemed to face.
Subsidence is another location-specific risk for homeowners. The problem occurs when the ground shrinks following a prolonged period of drought and a building’s foundations are damaged as a result, causing structural damage to the property. Areas with clay soils are particularly prone.
Dry summers in recent years have resulted in an increase in subsidence claims. As such claims tend to be expensive, often running to several thousand pounds, there is likely to be a continued impact on buildings insurance premiums for those living in affected locations, such as London and the south east of England.
When it comes to contents insurance, burglary continues to be a problem, with thieves increasingly attracted to the high-value, portable gadgets and technology devices that can be found in many homes.
We can expect insurers to continue to promote home security measures in a bid to reduce the incidence of burglary.
With premiums still ticking upwards, many policyholders will be seeing higher prices when they are invited to renew their cover by their existing insurer. One way to avoid this is to shop around every year and take advantage of the lower prices that are on offer through MoneySuperMarket.
Home insurance premiums over time
“ Insurers are expecting the UK’s weather to become more extreme as a result of climate change, which they say will result in more claims and, inevitably, higher premiums.”
Average premiums by region
- London had the most expensive combined premiums in Q4 2019 (£203.78)
- Those in the North East pay the least on average, with combined premiums of £121.89
- 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 particularly prone to subsidence thanks to their clay-based soils, which shrink in times of drought
When you insure your property, the main risks to the building include storm and flood damage, fire and subsidence.
Bigger towns and cities tend to have higher crime rates, which can contribute to higher costs.
As far as your belongings are concerned, there's the threat of flooding and fire damage, but for most people the biggest risk on a day-to-day basis is burglary.
Insurers set their prices according to the likelihood of claims from these risks, with regional variations corresponding to the number of 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 might also lead to an increased number of subsidence claims.
As for burglary, official figures show that the rate of 'acquisitive crime', which includes burglary, has fallen, but increases in typical contents premiums in recent years might indicate that insurers are paying out for an increase in burglary claims driven by widespread ownership of expensive, portable technology.
In general terms, burglary is more of a problem in urban areas, which is one reason why London has higher premiums than other parts of the UK.
How property type affects home insurance costs
- Those who live in a flat or apartment pay the highest premiums on average* for combined buildings and contents insurance, at £149
- The cheapest premiums on average apply to those living in a bungalow, at £127 for buildings and contents insurance
- 75% of people who live in a flat or apartment enquired for 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 have a big impact on your risk profile from an insurance company’s perspective.
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 £149.
The average premium for a house stood at £146 in Q4 2019, while bungalows saw the lowest premium by property type in the quarter at £127.
The good news for all, however, is that you can usually save money on your premiums if you shop 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.