Home insurance premiums continue to drop

But flooding issues remain a concern

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The Independent Online

The downward trend for home insurance premiums since the start of 2012 has continued over the last three months, according to the AA.

Its latest figures for July to September show buildings insurance down nearly six per cent on the same period last year, contents insurance down 3.8 per cent and combine buildings and contents falling 6.6 per cent.

"I believe that it would take a very severe winter to reverse the downward trend in the short term," said Simon Douglas, director of AA Insurance. "We are in a competitive market and rate reductions are still being made but in the longer term, major flooding for example could lead to sharp premium rises, particularly for buildings cover. This is what happened after the 2007 floods. Otherwise, I believe that home premiums will continue to offer good value for money."

But he added that flooding remains a concern for insurers. "Consultation on the  Flood Re solution arrived at by the Government and the Association of British Insurers, which aims to protect homes at greatest risk of flooding, ended on 20 September. However, the measures proposed appear complex and onerous for insurers.  There are also controversial exclusions such as small businesses and properties built after 2009.

"Flood Re will protect half-a-million homes in the worst-affected parts of Britain but will exclude many others that are at reduced, but still very real, risk of flooding. They will find it more difficult to find insurers willing to quote and, ironically, they may be asked to pay more than those that fall within the Floor Re provisions and are at higher risk, because they won’t benefit from subsidies from the market as a whole.