| Link(s): | The cost of home insurance rises as insurers support customers and battle cost pressures. | ABI |
Context
The ABI report that the average home insurance premium is up by 4% in the last quarter of 2023, as insurers support customers hit by a succession of storms battering the UK.
Key points to note and next actions
The ABI’s latest Household Premium Tracker shows that home insurance prices rose in Q4 of 2023.. The quarter was dominated by a succession of storms hitting the UK causing widespread property damage, with £352 million being paid out to support customers whose homes were damaged by Storms Babet, Ciaran and Debi.
The ABI’s Tracker covers over 16 million policies and looks at the price consumers actually pay for their cover, rather than the price they are quoted. The figures show that between 1st October and 31st December 2023:
- The average premium paid for a combined buildings and contents policy was £364 up £14 (4%) on the previous quarter. In the year ending Q4 2023 the average premium rose by 19%.
- The average buildings only policy was £284, up £12 (4%) on the previous quarter. Over last year, the average premium increased by 15%.
- For contents only cover, the average price paid at £131 rose £5 (4%) on the previous quarter. Over the last year, the average premium rose 7%.
Cost pressures for insurers include:
- Bad weather – Insurers paid out £352million, dealing with 36,000 claims to their home insurance customers following Storms Babet, Ciaran, and Debi. These were three of the six named storms that hit the UK in the last quarter of the year, along with a tornado in Manchester. The full insured costs of these storms will not be known for several months. The beginning of the year also saw a surge in burst pipe claims following a cold snap.
- Increasing rebuilding costs – The House Rebuilding Cost Index (HRCI) compiled by the Building Cost Information Service measures changes in the price of rebuilding costs, such as the price of raw materials and labour. In the two years to January 2024 the Index rose by 21%, further impacting on the cost of repairing homes.
Despite rising costs, home insurance remains competitively priced. When adjusted for inflation, the average price of cover has actually fallen between 2014 – 2023. During 2017 – 2022, the average cost of claims rose by 6% in real terms.