Wet weather to push insurance premiums up
The cost of vehicle and home insurance will continue to rise following the wettest April to June on record, the AA has said.
Its quarterly British Insurance Premium Index revealed that the average cost of annual comprehensive car insurance rose by 4.3 per cent to £1,034 in the three months to the end of June - a rise of 8.5 per cent over 12 months. Car premiums have risen after two relatively stable quarters.
Home insurance is also set to increase in coming months as a knock-on effect of recent flooding, the AA said.
This warning comes despite the cost of home insurance policies falling slightly over the second quarter as mild weather and competition drove prices down.
"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," the director of AA insurance Simon Douglas said.
The latest flooding events, which occurred in places with little or no flooding history may prompt insurers to push up their premiums 'sooner rather than later', although it is unlikely they will reach the 21.9 per cent increase that occurred after the 2007 floods.
According to the AA, insurers have also seen an increased number of claims related to weather damage from high winds.
"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," he added.
The Government and the insurance industry are currently discussing ways of providing cover for homes that are in known flood zones. According to the Committee on Climate Change, 4.1 million properties are at some flood risk, while 330,000 are at ‘significant' risk, an increase of 12 per cent over the past decade.
Meanwhile, Douglas described the car insurance market as 'in turmoil' as some insurers increase their premiums while others are cutting prices to expand their customer base.
"While this is great news for consumers, they need to make sure they're getting good cover, not just a good price."
Young drivers typically take the brunt of premium increases. Premiums for men aged between 17 and 22 rose by 7.5 per cent to an average of £2,792, while premiums for women of the same age group rose by 6.5 per cent to £1,995.