Insurance premiums have seen little change over the last year, despite fears that last year’s floods would see car and home insurance premiums go through the roof, the latest AA British Insurance Premium Index has revealed.
According to the research, the average annual premium quoted for fully comprehensive car insurance
now stands at £682, making it £3 cheaper than at the end of 2007. home insurance
premiums have seen little change over the last year; the research showed that the average quote for buildings insurance remained the same at £209, while contents cover rose by just one per cent to £129.
The figures go against predictions, Andrew Strong, CEO of AA insurance
said: "A recent Datamonitor report suggested that the car insurance industry would become profitable by the end of 2009 – but we calculate that an annual premium increase of 20 per cent would be needed to achieve that. The latest AA index shows that this is a far from realistic expectation.
"Similarly, speculation that home insurance premiums would rocket because of last year’s floods was clearly wrong. But I do expect premiums to continue rising over the remainder of the year," Mr Strong continued.
According to Mr Strong, despite the current flat-lining in the car insurance market, it is not set to continue as insurers pay out more than they charge.
Mr Strong continued, "insurers continue to be squeezed between increasing costs such as legal expenses and personal injury claims and competitive pressure. For every £100 taken in premiums the industry shells out £112 in claims.
"If premiums don’t continue to rise at a realistic rate, there will be a point when large premium increases become inevitable. That would be unhelpful for customers and will damage the reputation of the industry."
The home insurance industry was hit last year by the extensive floods in the UK, which is why little change in premiums has come as a surprise.
"I believe the slight fall in average quoted premiums for buildings cover is explained by a rise in the number of risks not being quoted by some insurers, suggesting sensitivity to flood risk," he said.
However, the insurance industry, under the ABI Statement of Principles for the Provision of Flood Insurance must agree to insure flood-risk customers provided adequate investment in flood defences continues.
Mr Strong concludes, "the Government shouldn’t take it for granted that the agreement will continue to be renewed indefinitely. It’s vital that proper investment is made to protect homes and businesses from flood risk and that careful consideration is given to the location of new housing stock."
© Fair Investment