Home insurance premiums continue to drop

But flooding issues remain a concern

Flashback to 2012: Flood waters pours into a residential street after the River Wansbeck broke its banks in Morpeth (PA)

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 buildingsinsurance down nearly six per cent on the same period last year,contents insurance down 3.8 per cent and combine buildings andcontents falling 6.6 per cent.

"I believe that it would take a very severe winter to reversethe downward trend in the short term," said Simon Douglas, directorof AA Insurance. "We are in a competitive market and ratereductions are still being made but in the longer term, majorflooding for example could lead to sharp premium rises,particularly for buildings cover. This is what happened after the2007 floods. Otherwise, I believe that home premiums will continueto offer good value for money."

But he added that flooding remains a concern for insurers."Consultation on the  Flood Re solution arrived at by theGovernment and the Association of British Insurers, which aims toprotect homes at greatest risk of flooding, ended on 20September. However, the measures proposed appear complex and onerous forinsurers.  There are also controversial exclusions such assmall businesses and properties built after2009.

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