Motor and home rates remain stagnant, according to index.
Findings from the latest AA British Premium Index contradict insurers who predicted sky-high rates after last summer’s floods, and research suggesting motor insurance could be profitable by the end of 2009.
According to the new business index, the first quarter of 2008 saw the average quoted premium for buildings cover remain stagnant at £209 while contents insurance rose by just 1% to £129. The average premium for combined buildings and contents cover fell by £4 to £293.
An AA spokesman said: “A lot of people said that the floods were going to increase premiums by up to 50% but that didn’t happen. Despite extensive flooding, premiums only increased a small percentage.”
An ABI spokesman said premium rises took time to flow through the system, and added that incidents of bad weather would need to happen on a regular basis to cause major increases.
He said: “Obviously in individual pockets, where property owners have been affected by floods, or if they live in a vulnerable area, that will impact premiums. And some excesses have risen for floods, which may be a way for insurers to minimise premium rises.”
Meanwhile, after a year of increases that added nearly 6% to the average annual premium quoted for comprehensive motor insurance, the index showed a slight fall. It now stands at £682, which is £3 less than at the end of 2007, but £37 more than this time last year.
Andrew Strong, chief executive of AA Insurance, said an annual premium increase of 20% was needed to achieve profitability in the motor insurance industry by 2009, which he called unrealistic.
This contradicts Datamonitor research which predicted the motor market would see profitability next year.
He added: “Insurers continue to be squeezed between increasing costs such as legal expenses and personal injury claims, and competitive pressure. For every £100 taken in premiums, the industry shells out £112 in claims.
“If premiums don’t continue to rise at a realistic rate, there will be a point when large premium increases become inevitable. That would be unhelpful for customers and will damage the reputation of the industry.”