In May 2024 we shared the depressing news that that the average cost of home insurance rose by 31% for the previous year! So what is the position now?

Rising Costs and Inflation

According to the latest Consumer Intelligence Home Insurance Price Index, the average quoted price of home insurance increased by 41.6% in the 12 months leading up to April 2024. As mentioned in our previous post this dramatic rise is primarily due to inflation, which has affected many business sectors.

Home insurance providers have faced higher costs for repairs – both the cost of materials and labour. These are passed on to us with increased premiums.

Regional Variations

The increase in home insurance premiums has not been uniform across the UK. For example, London has seen a 49.9% rise in quoted premiums, while the North West has experienced a 37.6% increase. These regional variations can be attributed to factors such as crime rates, the likelihood of flooding, and the frequency of claims in specific areas.

Impact of Climate Change

Climate change has also played a significant role in the rising cost of home insurance. The frequency and severity of extreme weather events, such as flooding and storms, have increased, leading to more claims and higher premiums.

There were 12 named storms between September 2023 and August 2024. The UK hasn’t seen a storm season this busy for seven years.

Claims Statistics

Here are some recent statistics on home insurance claims in the UK:

1. Total Claims Paid: In the first nine months of 2024, insurers paid out a total of £4.1 billion in property claims. This is the largest amount paid out in the first nine months of any year on record.
2. Average Amount Paid: The average home insurance claim rose to £6,002 in Q3 2024, which is a record high and 33% higher compared to the same period in 2023.
3. Weather-Related Claims: Claims for damage to homes from storms, heavy rain, and frozen pipes reached £136 million in Q3 2024. This is the sixth consecutive quarter that weather-related claims have been above £100 million.
4. Subsidence Claims: Subsidence claims were £66 million in Q3 2024, rising 11% on the previous quarter and 61% on Q3 2023.
5. Daily Claims: Insurers pay out £8 million per day for home insurance claims.

Less Competition

Unfortunately, there has also been a contraction in the number of insurers offering standard home insurance, including: –

• Aviva’s acquisition of Direct Line and Churchill. This also includes UK Insurance which works with 26 other companies to provide insurance, including Sainsburys, HSBC and Volkswagen. Aviva themselves already support and provide insurance solutions including Marks & Spencer, NatWest & Santander.
• Royal & Sun Alliance (Including More Than) withdrawing – they simply refer business to Admiral.
• Allianz and LV merger (see here)

For Mid & High Net Worth Home Insurance the position is even bleaker.

Impact of Reduced Coverage on Renewal Prices

Over the last 12 months even homeowners with no claims have continued to face increases of up to 40.9% increase in their insurer’s initial renewal premium.

Understandably home owners are shopping around and rearranging their policies to manage rising costs. Released every three months, the ABI’s data gives the most accurate picture of the market as it’s based on prices consumers are actually paying, rather than quotes, and combines both renewals and new policies. The ABI’s latest report shows the average price for a combined policy actually fell to £403 in October to December 2024, down from £407 in the third quarter of the year.

However, the shopping around approach and trend has led to a situation where actual renewal prices paid may not fully reflect the reduced cover that has been arranged – often ‘cheaper’ polices offered start with:

• strict eligibility assumptions,
• very basic levels of cover,
• low inner limits for valuables
• higher excesses.

Whilst shopping around approach can help lower premiums in the short term, it may leave you vulnerable to significant financial losses in the event of a claim. It is essential you carefully consider the level of cover you actually need and ensure you are adequately protected.

Forecast for the Next 12 Months

Looking ahead, the forecast for home insurance premiums in the UK remains uncertain. While some experts predict a continued rise in premiums due to ongoing inflation and climate change impacts, others suggest that prices may stabilize as the market adjusts to these new realities.

Conclusion

In summary, the past year has seen a substantial increase in home insurance premiums across the UK. Hopefully, we have helped you to weather the storms especially when an insurer has withdrawn form the market.

At Munro-Greenhalgh we want our clients to stay informed and we will work with you to ensure that your policy cover remains appropriate for needs and your pocket!

Sources:
https://www.theactuary.com/2024/06/20/home-insurance-prices-surge-past-12-months
https://www.moneyexpert.com/news/why-are-home-insurance-costs-rising-these-are-the-hidden-causes-you-might-be-unaware-of/
https://www.abi.org.uk/news/news-articles/2024/112/year-to-date-property-claims-payouts-hit-4.1-billion/
https://bing.com/search?q=recent+statistics+on+home+insurance+claims+UK
https://www.consumerintelligence.com/articles/uk-general-insurance-predictions-for-2025