Home Insurance Rises due to Adverse Weather and Inflated Repair Costs

The average house insurance premium rose by 4% in the last quarter of 2023 after multiple storms hit the UK, according to ABI. Following widespread flooding across the UK last week, it is thought that premiums could rise again.

According to ABI’s latest Household Premium Tracker, the average price of home insurance increased in the fourth quarter of 2023.

The final quarter saw multiple storms hit the UK causing widespread damage to properties, with £352 million paid out to those whose homes were damaged during Storm Babet, Ciaran and Debi alone. ABI data shows that insurers could pay out up to £560 million to those whose properties, vehicles or businesses were damaged by the storms.

It is likely that, as insurers continue to battle weather damage and inflated rebuilding costs, the widespread flooding seen across the UK last week could drive the price of home insurance up further.

ABI’s Tracker reveals that between 1 October and 31 December:

• The average premium paid for a combined buildings and contents policy was £364, an increase of £14 (4%) on the previous quarter. At the end of Q4 2023, the premium average climbed by 19%. Across the whole of 2023, the average premium rose by 13% to £341. 
• The average buildings only policy was £284, up by £12 (4%) on the previous quarter. Over last year, the average premium had increased by 15% to £262. 
• The average price paid for contents only cover at £131 rose by £5 (4%) on the previous quarter. The average premium rose 7% to £124 over the last year.

With adverse weather on the rise due to climate change, premiums may increase as insurers account for a growing number of claims, margins affected by last quarters’ storm activity and inflated rebuilding and repair costs.

Following Storms Babet, Ciaran and Debi- just three of six significant storms and tornado that hit the UK in late 2023- insurers received 36,000 home insurance claims and paid out £352 million, although it will be several months before the full cost of the storms is known. The beginning of the year also saw a rise in claims for burst pipe claims, whilst Storm Henk in January 2024 left hundreds of properties, businesses and agricultural lands flooded.

The cost of home repairs has also climbed, compounding the financial cost of the damage incurred during the storms for insurers, and customers who are likely to see a hike in premiums. The House Rebuilding Cost Index (HRCI), which measures changes in the price of rebuilding costs, such as material and labour, shows that in the two years leading up to January 2024 the Index rose by 21%.

Nonetheless, home insurance prices have remained competitive. When adjusted to account for inflation, the average price of cover has fallen between 2014 – 2023. The average cost of claims rose by 6% in real terms between 2017 – 2022.

Following concerns that premiums will rise again following the flooding across the UK last week, insurers and intermediaries must consider what can be done to ensure that they are continuing to provide policies which support customer needs and deliver value for money, whilst mitigating the increasing pressure of rising costs and demands.

In response to the flooding, ABI has called for more to be done to “support communities up and down the country to be more resilient” to extreme weather. General Insurance Policy Manager, Laura Hughes suggested that the government should “guarantee that flood prevention and resilience measures are considered in all planning decisions and building standards” and “adequately [fund] flood defence investment and maintenance”.