Home insurance premiums linked to spending review

Home insurance premiums continue to rise as insurers pass on the cost of covering flooding incidents, new figures show.

And the increases could gather pace if the government reduces investment in flood defences in next week's spending review, the AA has warned.

Premiums for both buildings and contents rose sharply in the year to the end of September, with a record jump in the cost of contents cover, according to the latest AA British Insurance Premium Index. The cost of the average combined buildings and contents policy has risen by 6.7 per cent over the past year to 194, while standalone contents policies have gone up by a 14.9 per cent to 73, the biggest rise since the index began 16 years ago. The typical cost of a stand- alone buildings policy has also increased, by 7.5 per cent to 133 a year.

Home insurance premiums have historically been relatively static but increases have become gradually more pronounced over the past two years.

Simon Douglas, director of AA Insurance, said the trend reflected insurer concerns over the cost implications of climate change and flooding risks.

"With the government spending review about to take place, I'm particularly concerned that investment in flood defences is not affected," said Douglas, pointing to recent major floods at Cockermouth and Tewkesbury. "If spending on flood defences is reduced, it puts thousands of homes at risk of being unable to insure their homes or obtain mortgages," he said.

The AA also revealed that the cost of car insurance has soared by more than 40 per cent in the past year, with premiums rising at a record rate. Comprehensive car insurance premiums jumped 11.5 per cent in the three months to the end of September, taking the year-on-year increase to 40.5 per cent. The biggest premium increases have been borne by the youngest drivers, with men aged 17-22 suffering a 47 per cent hike in premiums over the last year.