Storm Desmond not expected to affect home insurance premiums, says AA Insurance

AA Insurance has said the flooding from the effects of Storm Desmond in Cumbria is unlikely to lead to an immediate rise in home insurance premiums.

Mike Lloyd, the company’s director, has said that claims in excess of £1bn would be necessary to trigger across-the-board increases. The floods have so far seen claims of around £250m come in to insurance companies.

According to the AA’s benchmark British Insurance Premium Index, home insurance premiums have been falling fairly steadily for four years.  Nearly £50 has been wiped of a typical quote for a new combined buildings and contents policy – from £191.83 at the end of 2011 to £149.30 today.  The broker expects premiums during the fourth quarter to again show a modest fall.

“The UK hasn’t suffered a severe winter since 2010 and although there have been flooding events such as February 2014, none have been anywhere as severe as the 2007 disaster which cost insurers around £3.3bn,” said Lloyd.

“Following that widespread damage our Index, which has been tracking the quarterly movement of home insurance premiums since 1994, showed that the average quote for cover rose by around 20% over the following year.

“And while benign weather may have triggered premium falls in the first place, the continuing downward momentum now has more to do with competitive pressure.

He said that insurers had sufficient reserves to meet claims such as the recent flooding, adding that home premiums also tended to be less volatile than motor ones. He said it would take widespread weather damage to trigger a rapid change in rates across the market.

“Nevertheless, some analysts believe that home premiums can’t fall much further and although we don’t believe we’ll see much significant pressure on premiums until and unless there is widespread severe weather, we do expect home premiums to bottom during the first half of 2016,” added Lloyd.

Mark Dugdale