The AA Insurance Premium Index for Q3 2017 shows a small rise but includes warning that costs could increase if bad weather and IPT bite.

Premium costs in the home market have shown a modest rise in the third quarter of 2017 according to the AA British Insurance Premium Index.

The Index learned that the average quote for combined buildings and contents policies went up, but by less than £2 (or 1.2%) to £59.69 over the three month period ending 30 September.

The Shoparounddata – based on the five cheapest quotes for each customer in a nationwide ‘basket’ of home policies – also revealed that the rise was driven by an increase in the quoted premium for a standalone buildings policy of 1.4% to £114.47 over the same period, although the typical cost of a contents-only policy dropped by a modest 5p (0.1%) to £61.20.

Over 12 months a typical price of a combined policy has increased by just 3.5%, accounted for by the increase in Insurance Premium Tax (IPT).

Value
Michael Lloyd, the AA’s director of insurance commented: “These are very small price changes that reflect the competitive nature of the market and represent very good value for householders. 

“Premiums have remained low for a long time and there is some evidence to suggest that they aren’t keeping pace with developing risks such as potential weather damage and flooding.” 

However, he warned that if stormy weather continued that home owners could expect rising premiums and these increases would not just affect householders who have been directly impacted by damage or flooding.

Reputation
He added: “Insurance has become highly price-sensitive to the point that there is less consideration of the quality of the cover and what it provides which doesn’t serve customers well.  Nevertheless, the industry has a good reputation for responding well to those who need immediate help.

“Despite the relative lack of premium movement over the last quarter, the trend is upwards – albeit modestly so.” 

Lloyd was also concerned that IPT remains a potential target for the Chancellor.

He commented: “Although I have no direct evidence that there will be an IPT increase this November, the Treasury has previously suggested that IPT and VAT should be more closely aligned. 

“I recognise that the government has budget shortfalls and I hope the relative lack of premium movement in the home insurance market doesn’t encourage him to try to fill the holes by taxing responsible people trying to protect their of homes.”

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