And the introduction of Flood Re is not expected to have a material impact on premium levels
The average cost of home contents insurance has fallen by 5.7% over Q2 2014 compared to the same period last year, according to the AA.
Buildings insurance meanwhile has fallen by an average of 8.5% over the same period.
The AA British Insurance Premium Index revealed that the average home contents policy cost £64 over the last three months, compared to £67.89 for the same period in 2013 and buildings insurance has fallen to £116.51 from £127.38.
AA Insurance director Simon Douglas said this drop was a result of fewer claims than expected being made, despite widespread flooding.
“Although the cost of claims for homes affected by the most recent floods reached £1bn, this was within the capacity of the industry and it has had no effect on premiums – despite suggestions that it would trigger sharp premium increases,” he said. “As a result, the home insurance market has been more profitable than for car insurance and this has given insurers the capacity to keep premiums in check.”
And Douglas said that he did not expect the introduction of Flood Re, which will be funded by a levy across all policies, to have a substantial upward effect on premiums.
“Flood Re will be funded by a levy on all home insurance premiums and while that may trigger some premium increases, provided there are no severe weather events such as floods or extreme winters over the next couple of years, I expect home insurance competition to remain tough,” he said.