Simon Read: Mild winter cuts the cost of home insurance

The average quote for a buildings and contents policy has fallen by 3.6 per cent

The cost of a buildings policy has dropped by 10.1 per cent over the year, with the cost of a contents policy falling by 8.2 per cent (Rex)

The mild winter has been good news: it’s led to cuts in the cost of home insurance. The latest British Insurance Premium Index from the AA shows that the average quote for a buildings and contents policy fell by 3.6 per cent in the first three months of the year leaving the average annual policy at £158.66.

“Home premiums are most likely to be affected by extremes of weather and the recent winter has on the whole, been notable for its lack of heavy rain, snow, winds and extreme temperatures,” said Janet Connor, managing director of AA Insurance.

The cost of a buildings policy dropped 3 per cent over the quarter to £112.74 and by 10.1 per cent over the year. Meanwhile the cost of a contents policy fell 2.3 per cent to £60.28 in the first three months of the year and by 8.2 per cent over 12 months.

Motor insurance has also got cheaper - falling 1 per cent to an average £530.47 - but there could be price rises ahead, reckons the AA. That’s because the first quarter often sees insurers offering price reductions to build market share at a time when more policies are sold.

“Low premiums can’t last,” said Janet Connor. “We’re starting to see insurers quoting higher prices and I think that’s the beginning of a trend, but the rate of increase isn’t going to be turbo-charged.”

She said that for many insurers, the cost of claims is greater than premium income which means that present motor insurance prices are unsustainable.

She also warned that premiums could spiral again unless there is a crackdown on fraudulent claims.

“The cost of cover remains higher in the UK than in most other European countries thanks to the claims culture in the UK,” she said. “While the number of crashes on Britain’s roads has fallen, the number of injury claims has risen.

“My greatest fear is that if insurance fraud such as whiplash injury claims isn’t brought under control and quickly, we will see a repeat of the spiralling premiums of 2010 and 2011 when the cost of the average policy rose by over 40 per cent in just 12 months.”

She said consumers need to understand the connection between premiums and making fraudulent claims. “Car insurance is there to protect drivers in the event of a crash, not as an opportunity to cash in,” she said. “Insurance isn’t a savings account.”