The latest benchmark AA British Insurance Premium Index shows that the cost of an annual home insurance policy, both buildings and contents, fell very slightly over the second quarter of 2012.
However, the trend continues to be upward. Over the 12 months to 30 June 2012, the cost of a buildings policy rose by 6.9% to £176 (a fall of 0.8% over the second quarter), while the cost of contents cover rose 4.8% to £92 (a fall of 0.1% over the second quarter), according to the Shoparound index. This is an average of the five cheapest premiums for each property in a country-wide basket of risks, from a range of insurers, brokers and schemes.
Simon Douglas, director of AA Insurance, says that the lack of movement over the past three months reflects both the competitive nature of the market as well as a mild winter and fine weather during the first part of the year.
"Since then we experienced the wettest June on record and the bad weather has continued into July, resulting in flood insurance claims approaching £200 million, according to some estimates," he says.
"While on their own these claims are unlikely to result in the kind of premium increases we saw after the 2007 floods, when the average quote for a buildings policy increased by 21.9%, insurers are likely to respond by resuming the upward premium trend sooner rather than later.
"What marks the latest flooding events is that in many cases, they are happening in places with little or no history of flooding. They have followed extreme rainfall over a relatively short period, resulting in flash floods from surface water rather than flooded river systems," Mr Douglas points out.
Not only that, insurers have seen a rise in other weather damage - high winds and even tornadoes tearing up trees, toppling chimneys and ripping off roof tiles.
"The kind of weather that has been battering Britain recently reflects an increasingly unpredictable pattern that insurers need to take account of when setting their premiums.
"They need to have adequate reserves in order to meet future claims."
Future flood cover:
The Government is currently discussing with the insurance industry a way of providing cover for homes that are in known flood zones. According to the Committee on Climate Change, 4.1m properties are at some flood risk while 330,000 are at 'significant' risk, an increase of 12 per cent over the past decade.
"These discussions seek to provide an agreement to replace the 'Statement of Principles' that has enabled flood-prone homes to be insured since 2000, but this expires at the end of June 2013," Mr Douglas says.
"It's vital that these negotiations are concluded sooner rather than later or there will be a risk that many people won't be able to obtain flood cover, with all the implications that has for property values and mortgages."
Mr Douglas says that there has been a lot of speculation that any solution will result in premium increases for everyone, in order to subsidise those who are unfortunate enough to live in a flood zone. He is urging the Government to ensure that there is:
No additional cost to homeowners
Ensure the agreement doesn't create incentives to encourage house building high flood risk areas
Support for home owners who have suffered past flood damage to improve the flood resilience of their properties to keep future costs down
Real investment in flood defences to reduce the impact of adverse weather and the costs it creates.
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