Home insurance premiums hit record high

While (slowly) falling mortgage costs and steadying inflation figures have been a welcome relief for homeowners and consumers alike, the Bank of England’s interest rate cut in August was a new blow for savers, with many lenders dropping rates below 5%. And reductions in savings and inflation rates certainly haven’t fed through to insurance bills. 

Ever-increasing home and car insurance premiums continue to eat a hole in people's personal finances. According to data from the Association of British Insurers (ABI), the average price of home insurance premiums has risen by nearly a fifth (19%) on a year-on-year basis and Consumer Intelligence revealed that home insurance quotes have spiked by nearly 42%, marking the highest annual increase on record.

Extreme weather and the impact of Storms Babet, Ciaran and Debi triggered more payouts this year, with insurers forking out a record £1.4 billion on claim payouts between April and June 2024, per ABI figures. The latest report marks the fifth consecutive quarter where weather-related claims have crossed the £100 million mark, with claims from storms, heavy rain and frozen pipes reaching £144 million.

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While insurers have had their fair share of struggles, homeowners have had to bear the brunt of the financial impact. Data from the Financial Conduct Authority (FCA) suggests that 23% of the claims were rejected by providers in 2022, and some firms even refused to payout on nearly half the cases.

 Sam Richardson, deputy editor of Which? Money, said, “Good quality home insurance is increasingly important – yet customers with these products face some of the lowest claims acceptance rates. While some home insurers' prices are going up, research has found that some are prolonging customers' ordeals by failing to deal with claims in an appropriate manner.”

Where are home insurance premiums rising?

Consumer Intelligence’s data from April 2024 found that homeowners in London have seen the largest increases, with quoted premiums having almost doubled (49.9%) since last year. In comparison, the North West was the least expensive area. All regions have seen quoted prices increase over the past 12 months, ranging from the North West at 37.6% to the South East at 45.8%.

In the ten years since Consumer Intelligence first started collecting data (February 2014) quoted premiums have risen overall by 68.8%.

Factors such as the age of policyholders and of the property are also a big factor in the rises. 

• Over-50s households (42.4%) continue to see slightly higher quotes for their home insurance, compared to the under-50s (41%). 
• Properties built between 1910 and 1925 attracted the highest average quoted premiums (46.4%), while the lowest quoted costs were for homes built between 1940 and 1955.

“Homeowners with prior claims may see additional increases in coming months following recent storm damage, although insurers could spread the claim costs across all policyholders driving further market inflation,” said Laura Vas, senior insight analyst at Consumer Intelligence.

Ways to cut the costs of home insurance

You can't predict weather events or what your insurer will charge but there are some steps you can take to cut the cost of your home insurance.

1. Combine your insurance policies to cut costs
Most insurers will give you a discount if you go for a home insurance policy that covers both the building and contents.

2. Improve your home security
You may want to consider spending a little money now to save you money on your premiums in the years ahead. For example, upgrading your home security could save you money in the long run.

“A safer lock can drastically lower the cost of your policy, as it demonstrates you are proactively reducing the risk of a break-in and needing to make a claim,” Chris Lear from insurance broker One Sure Insurance told The Telegraph. Lock manufacturer Yale believes upgrading your home security could shave up to 10% off your premiums.

You could also join – or set up – a local Neighbourhood Watch scheme. These reduce local crime and insurers love them, typically reducing premiums by 5% for scheme members.

3. Check your policy and think about skipping the extras
Consider what you are paying for. There are several extras that you may not need, that will increase the cost of your policy. 

4. Increase your excess
Another way to cut your premiums is to increase your excess. If you are happy to pay more if you do make a claim, your premiums will fall substantially. For example, putting your excess up to £400 from nothing could reduce your premiums by around 25%.

5. Don't forget your no-claims bonus
Finally, don’t forget your no-claims bonus. Insurers love customers who pay them premiums but don’t make a claim. So, they will give you a no-claims bonus. Even a one-year no-claims bonus could cut your insurance by 10%, rising to as much as 50% if you have five years or more without claims, says Go Compare.

6. Check if you can get favourable rates via a current account or credit card
Some packaged bank accounts or rewards credit cards may offer home insurance at a discounted rate or as a perk with the account so it's worth checking the small print.

7. Pay for your insurance annually rather than monthly Another good option is to pay for your insurance annually rather than monthly. Many people choose to pay monthly as it seems easier to pay in small chunks than one lump sum. But you will pay more in the long run. That’s because insurance firms charge more for monthly premiums. On average a home insurance policy costs 17% more if you pay monthly, according to Go Compare. If you can’t afford the full amount, then put it on an interest-free credit card and pay that off in 12 monthly payments instead.

Nathan Blackler, home insurance expert at Go Compare, said, “Despite external factors such as this [bad weather], there is also a wide range of factors that will affect the cost of your home insurance premiums, from the size of your property to the area where you live. All of which can impact how much you are likely to pay for your insurance, which is why it’s always so important to shop around when your policy is up for renewal, so you’re getting the best product and price for your circumstances.”