A downward trend has been observed in home insurance premiums, likely caused by the COVID-19 pandemic and a pricing battle being waged by price comparison websites (PCWs), an industry study has found.
Despite prices going down, volatility is expected to remain high in the coming months, with insurers forced to apply new pricing rules, according to a report by Consumer Intelligence. Over the past 12 months, home insurance premiums have decreased by 8.2%, with the average annual buildings and contents policy now standing at £138.
“More people have been staying at home for longer periods – with burglars deterred from breaking into houses and water damage claims down as people are on hand to respond quickly to leaks,” said Harriet Devonald, pricing expert at Consumer Intelligence. “What we’re also seeing in the home PCW market is something of a pricing battle, triggered by a few providers – with PCW-led distribution strategies – that have been really trying to grow their home book. And this has triggered reactions from some larger players trying to keep up and protect their ground.”
Devonald expects new business premiums to go up, as the market levels out new business and renewal pricing. By how much, however, remains to be seen.
“These new rules are likely to impact home insurance far more harshly than motor, with home insurers having a lot of old and large back books,” she said. “And some insurers will be affected more than others.”
Since Consumer Intelligence first started collecting data in February 2014, home insurance premiums have decreased by 6.9%. The decline was larger for the under-50s homeowner segment (-8.9%) than the over-50s segment (-4.5%).
London remains the costliest region in Britain for home insurance, with an average premium of £193. Londoners pay roughly one-third more than those in the nearby South East (£145), which is the second-costliest region.
The North East (£123) has the cheapest home premiums, followed by the East Midlands and North West, both at £128.
Premiums fell across-the-board for all regions, with double-digit decreases in both Yorkshire and the Humber (-10.9%) and the South East (-10.2%). Meanwhile, Wales (-3.9%) had the smallest decline over the last 12 months.
Age-wise, the price difference between the over-50 (£129) and under-50 (£145) homeowner age groups is just £16. Insurance for under-50s fell by 9% in the last 12 months, compared to a 7.1% decrease for over-50s in the same period.
Newer properties are cheapest to insure, with an average premium of £130 for 21st-century homes. At the opposite end, Victorian-era houses, or those built between 1850 and 1895, have the highest yearly premiums of £179. This is due to older properties’ need for more constant maintenance and the higher cost of materials.
Homes built between 1970 and 1985, and those erected from 1985 to 2000, recorded the biggest price falls over the last 12 months at 9.8% and 9%, respectively.