Home insurance premium increases start to level off

However, Simon Douglas, director of AA Insurance, doesn’t believe that this will mark the start of a sustained fall in premiums, pointing out that home insurers are suffering increases in both the cost of severe weather claims as well as fraud.

"While we can do little about the weather, the creation of a new Police Fraud Unit should help insurers to significantly improve detection and prosecution of insurance fraud," Douglas said.

"The number of people attempting to make claims for losses that are grossly exaggerated or non-existent has risen sharply, according to the Association of British Insurers.

"We need to persuade those thinking of swindling their insurer to think twice. After all, those who are caught falsifying or exaggerating claims will find it difficult to obtain cover from any other insurer because the industry is also getting better at sharing data about those attempting fraud."

Insurers continue to be concerned about future extreme weather damage and flash flooding.  The freeze in December turned out to be very expensive for insurers, covering as it did so much of the country and over such a long period.

Meanwhile the industry has been meeting Defra officials to consider the best ways to provide insurance protection for those homes that are most at risk of flooding.

"This will become particularly important after the current ‘statement of principles’, that ensures homes in flood-prone locations can continue to get insurance protection, comes to an end in 2013," Douglas pointed out.

"The industry is keen to continue building reserves for future severe weather events and I believe that premiums may need to rise further.

"The competitive market has ensured that home insurance remains remarkably good value for money.  After all, the cost of contents cover has risen only by 8.5% over 17 years while buildings cover has risen by 34% over the same period – even that is well below inflation," Douglas said.

"My concern is that insurers may be faced with more regular, extreme weather events. If that happens, then current premium rates will not be sustainable and premiums might have to be brought sharply into line."

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