Cost of home insurance soars 8.5% in one year

Published by Hannah Nemeth on 23 November 2017.
Last updated on 23 November 2017

Cost of home insurance soars 8.5% in one year

Home insurance premiums have risen by 8.5% over the past year – nearly three times the 3% rate of inflation.

Householders are paying on average £131 a year for their home insurance premiums, according to the research from insurance market expert Consumer Intelligence – whose data is used by the Office for National Statistics to calculate inflation statistics.

The study found that the cost of jewellery repairs and claims for water damage have helped to fuel the price rises. There have also been more fraudulent claims, particularly among younger households.

It suggests that claims for water damage have gone up now that more homeowners are installing extra bathrooms and wet rooms, while the rising cost of gold and diamonds has impacted on jewellery claims.

Another factor influencing the price hike is the government’s decision to hike Insurance Premium Tax (IPT) from 10% to 12% from 1 June. Think tank, the Social Market Foundation found that every household in the UK now pays the equivalent of £179 of insurance premium tax every year. Note IPT also went up to 10% from 9.5% on 1 October 2016.

The insurance industry had been worried about the possibility of more increases in yesterday’s Autumn Budget. However, Chancellor Philip Hammond announced no more planned rises in the tax, which will remain at 12%.

Consumer Intelligence says consumers in the South East and Wales have had the biggest home insurance price hikes, paying an average of £127 (up by 10.6%) and £123 (10.1%) respectively. However, while home insurance premiums in London have increased by 8.7%, Londoners pay the biggest premiums, of £168 on average, compared with the lowest premium of £119 (41% less) in the South West.

On a positive note, prices are slightly lower than three years ago, with owners of homes built after 2000 paying average premiums of £114 in response to tougher building regulations.  

‘There is no major factor driving increase’

John Blevins, pricing expert at Consumer Intelligence, says: “Claims costs are increasing, but there is no one major factor driving the market. Some trends are emerging, however, including escape of water claims and the cost of jewellery claims driven by price increases for gold and diamonds.

“Fraud also impacts home insurance claims in a similar fashion to motor – although claims tend to be smaller in severity, but greater in frequency.”

The table below shows average premiums and price rises around Great Britain.

REGION CHANGE IN YEAR TO OCTOBER AVERAGE PREMIUM (FIVE CHEAPEST)
South East 10.60% £127
Wales 10.10% £123
North East 9.30% £119
South West 9.20% £119
London 8.70% £168
East Midlands 8.20% £124
North West 8.20% £127
West Midlands 8.10% £124
Eastern 8.00% £128
Yorkshire & Humber 7.10% £131
Scotland 5.60% £137
GREAT BRITAIN           8.50% £131

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