Household premiums will stop falling

30.08.2005 Although premiums on building and contents insurance have declined over the last few years, insurance companies anticipate this to be a short term trend. Usually customers expect insurers to charge higher premiums when polices are renewed. However, lately this has not been the case for building, contents and even car insurance. According  to the Automobile Association (AA), British Insurance Premium Index building insurance premiums dropped by 1.89 per cent over the last quarter.

The average price is now lower than what it used to be in 1994. The AA has been tracking the prices quoted by car and home insurers for over ten years. Periodically they compare the premiums of 50 companies and calculate an average used to determine index trends.
Over the last decade premiums for car insurance have increased dramatically, but in most recent years prices have stagnated. Increased competition has brought figures down, although research finds that claim costs rise each year.  If the insurers’ margin is reached, a double digit percentage increase in all motor premiums could occur.
On the other hand, the harsh climate changes will soon have an impact on household premiums. The Association of British Insurers (ABI) has  informed that world wide flooding damages will cost the UK insurance industry ₤15 billion per year. Over the last two years flooding has been severe in areas such as Boscastle, Carlise and Yorkshire. Claims have risen dramatically, and insurers in the UK are paying back between ₤500 million and ₤1 billion yearly for weather related damages.
In 2003, insurance companies agreed with the government to provide flood coverage to properly protected regions.  To commit to such agreements and cover the rising costs of claims, household insurance premiums will probably start rising at a fast pace. Insurance companies have already warned the government about the risks of continuing high carbon emissions. If nothing is done, the ABI has predicted that by 2080 the annual cost of flooding damages for insurers will increase to ₤62 billion.