Cost of home insurance falling as strong competition drives down your premium

Home insurers are set to make a loss in 2015 for the first time in eight years. That’s the conclusion of a leading accountancy group who says that falling home insurance premiums and a destructive winter will see insurers paying out more in claims than they take in premiums next year.

The prediction comes after research reveals that strong competition has driven down the cost of your buildings and contents insurance and is set to continue to do so over the next few months. Keep reading to find out more.

Your home insurance is now £20 a year cheaper than a year ago

New research from the AA has found that around £20 has been wiped off the average combined buildings and contents insurance policy premium over the past year.

Between July and October, premiums for a home buildings policy fell by 3.1 per cent to £112.56, a fall of around 10 per cent over the past year. Contents policies have fallen in price by seven per cent in the last 12 months, and combined policies are now 11 per cent cheaper.

Janet Connor, managing director of AA Insurance, said: "The falls continue a long-term downward trend which suggests that there are home insurance deals to be done for those shopping around for their cover.

"Overall, the weather has been relatively benign for the past couple of years, notwithstanding the February floods, which cost insurers around £450 million compared with £3.3 billion following the 2007 disaster.

“As a result, insurers’ claims costs have been lower than expected, meaning that business has continued to be profitable and has allowed reserves to be grown. This has translated into lower premiums although homes at greatest risk of flooding are likely to have seen large premium increases."

Analysis by leading accountancy group EY has also found that premiums are set to continue to fall in 2015. Households can expect to see the cost of insurance fall 5 per cent this year and 3 per cent next year, as tougher competition between firms continues to squeeze premiums.

Home insurance providers set to lose money in 2015

The falls in insurance premiums and another winter of destructive weather will see home insurance companies face losses next year for the first time since 2007. Research from EY has found that the cost of claims is expected to overtake the amount customers pay in 2015.

Insurers are set to pay out £400 million for damage done to homes in 2014, representing 98.5 per cent of the payments they collected. This ratio will rise to 102 per cent the following year, according to the firm’s forecasts.

“The surge in claims, caused by very damaging weather in January and February and increasing pressure on premiums, may mean that the home insurance market moves off its seven year profit-track, and hits unprofitability in 2015,” said Catherine Barton, head of retail property and casualty actuarial at EY.

“In 2012, we saw a good example of insurers paying out high volumes of flood and storm claims (£622 million), but remaining money-making – this was due to higher premiums creating a buffer."

Home insurance may give you the peace of mind that your home and its contents are protected. But what else makes you feel safe in your home? We reveal the results next.

The top three things that make homeowners feel safe

What makes you feel safe in your home? A new survey from a leading insurance company asked 1,000 the same question and the results are surprising.

The Allianz Insurance research found that the most common answer was ‘lockable windows’ with three quarters of respondents saying that helped them feel safe. That was followed by ‘smoke alarms’ (66 per cent) and ‘neighbours keeping an eye on the house when away’ (45 per cent).

Nearly nine in ten people over the age of 55 say that they have kept an eye on their neighbours' house while they've been away, compared to half of 18-24 year olds.