After nearly a decade of static prices home insurance set for 5% rise
Home insurance premiums could rise after nearly a decade of static prices.
AA Insurance Services managing director Andy Briscoe has predicted that the market will rise over the next 12 months by as much as 5% above inflation.
Speaking in advance of the AA's quarterly premium index in October, which should show the first signs of movement, Briscoe said the rise was long overdue.
He said: "We are expecting home insurance premiums to show real increases of about 5% above inflation. Prices need to go up to keep track with claims costs."
The view is shared by Nigel Munns, partner at actuary B&W Deloitte. He says home insurers have been losing money since 1998.
Munns said: "In 2002 the claims ratio was 109%. For every £1 insurers received, they were paying out £1.09.
"Some insurers are talking about rates going up by 5%-6% over the next three years to catch up with claims costs.
"I would say it needs a little more this."
Though the two most powerful variables in household insurance - weather and employment levels - have been kind to insurers for the past few years, the market has been overcompensating for big rises ten years ago.
Since then the AA insurance index has shown little movement in the home market, while motor premiums have doubled.
But if Briscoe's predictions are correct, October's figures should show the trends reversed, with motor premiums flattening out as home premiums head up.