Home insurance premiums are continuing to rise, warns the AA, but the average car insurance rate is leveling out.
Combined buildings and contents insurance premiums have risen steeply the last year, with predictions that the upward trend will continue through to at least the end of the year. The average shoparound cost of buildings insurance is estimated by the AA to be £152, while contents insurance now costs £77. The higher cost of the buildings insurance shoparound rate, which has risen by 14% since the end of September 2010, is judged to be as a result of bad weather-related claims. Contents insurance has also risen, by 6% over the past year.
Car insurance premiums steady
The AA’s Premium Index also also reveals that car insurance premiums appear to have peaked. While motor insurance premiums had risen by 40% over a 12-month period to March 2011, the average cost of cover fell by 0.3% in the last quarter, the equivalent of a £2 reduction.This amounts to a 16% increase in the year to the end of September 2011.
Simon Douglas, director of AA Insurance said: ‘The past two years have seen the biggest-ever rises in premiums as insurers struggled to close a widening gap between premium income and claims costs. Although historically costs had been rising, premiums had not and, at the end of 2009, for every £100 taken in premiums £123 was being paid out. Something had to give, but the gap has now closed sufficiently to allow insurers to start pricing more competitively once again.’
Inflation may spoil the party
The easing-off of car insurance premiums may be short-lived, however, due to the rise in inflation (CPI increased to 5.2%). Which? money expert Dan Moore said: ‘The Consumer Prices Index inflation increase will add pressure to already cash-strapped homeowners and drivers, making it all the more important for people to give themselves time to shop around for quality and affordable home and car insurance.’
Which? Recommended Providers for car insurance – the best motor insurance providers in the market
Which? Recommended Providers for home insurance – where to find the best buildings and contents cover
Price comparison sites – a guide to buying insurance via online aggregators