Home insurance prices fall again to new record low

The price paid for combined buildings and contents cover was down 6% on 2021.

According to the ABI’s Household Insurance Premium Tracker, which surveys prices paid rather than quotes, separate buildings and contents policies were also at an all-time low at £228 and £116 respectively.

The Financial Conduct Authority’s ban on dual pricing came into force on 1 January last year.

The ABI analysed that in 2022, the average price to renew a combined buildings and contents home insurance policy fell by 10% reflecting, in part, the impact of the reforms.

Turbulent weather

The trade body highlighted the falls across the board had come despite a year of turbulent weather.

Storms Dudley, Eunice, and Franklin battered the UK last February with the bill for insurers totalling £473m.

During the record-breaking summer heatwave providers predicted a significant rise in subsidence claims. LV detailed in August that cases were up by 205% between June and July and were likely to increase further.

The ABI noted the full costs are likely to materialise during 2023.

Cold

The December cold snap led to a surge in claims for damage caused by burst frozen pipes.

Direct Line shocked the stock market with a profit warning in January that knocked nearly 25% off its share price. It flagged £90m of claims across home and commercial business from the December freeze citing burst pipes, water tanks and other related damage.

However, Aviva forecast the same month that the freezing UK weather would only cost it £50m at a group level.

Losses

Experts have consistently warned that pricing needs to rise in the home insurance market which is facing substantial losses.

In November EY forecast a 116% net combined ratio for home insurance for 2022 predicting it would stay high this year at 109%.

Earlier this month ratings specialists Fitch agreed labelling the outlook for UK home and motor insurers’ profitability as remaining “pretty dire for 2023” with ratios “well above 100%”.

Stark reminder

Laura Hughes, manager of general insurance at the ABI, said: “Last year was a stark reminder that the only thing predictable about the UK’s weather is that no one knows what it will do next.

“Insurers are always ready to support customers when the worst happens. Despite the amounts paid out last year, and a rise in the costs of building materials and labour, home insurers will continue to do all they can to offer competitive deals to customers.

“Insurers appreciate that these continue to be tough times for many households coping with the rising cost of living. Anyone concerned about being able to continue paying their home insurance premium should speak to their insurer about any alternative payment options that may be available.”

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