What's happening to home insurance premiums?

The cost of home insurance saw an annual rise of 19% in the first quarter of this year, with the finger of blame pointed at last autumn's stormy weather.

The latest data from the Association of British Insurers (ABI) – which is based on prices paid rather than quotes – follows figures from Compare the Market, which recorded an even bigger year-on-year rise from January to March 2024.

Here, Which? takes a closer look at the price of home insurance, why costs are rising and explains how to pay less.

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What's happening to home insurance prices?

The ABI's latest report shows the average combined home insurance premium was £375 in the first three months of 2024 – £60 more than the same period in 2023 and up by £11 compared with the previous quarter.

The 3% quarterly rise is slightly less than the 4% increase in the last quarter of 2023, but year-on-year home insurance premiums have increased by almost a fifth. However, it's still lower than the peak prices hit in the first quarter of 2016, when the average home policy cost an eye-watering £419.

The ABI releases the most comprehensive data on home insurance pricing on a quarterly basis, as it's based on the price paid by customers. It also reflects the premiums paid by all customers (both renewing and those shopping around). 

The chart shows how the average cost of a home insurance premium has risen since January 2022:

The ABI isn't the only industry group with an index showing how home insurance prices have changed. Comparison sites publish data as well, but their figures only reflect quotes given to customers searching for home insurance.

The latest report from Compare the Market found the average quote for combined home insurance hit £209 from January to March 2024. That's an increase of 31% compared to the first quarter of last year when prices stood at £159. 

Analysis by insurance price experts Consumer Intelligence found home insurance premiums have surged even more. The data – also based on quotes – showed the average home insurance price rose by 40.6% in the 12 months to January 2024. 

Consumer Intelligence offered some hope for squeezed homeowners, suggesting price rises could be slowing. Its figures showed that in the three months to January 2024, quoted premiums rose by 7.6% - lower than the rises of 8.5% and 9.9% recorded in the previous two quarters.

• Find out more: best home insurance

Why is the cost of home insurance so high?

The quick succession of storms Babet, Ciaran and Debi between October and November 2023 caused £352m of damage to homes, according to the ABI. It led to a surge in weather-related claims, worth a total of £573m paid - the most on record. Damage caused by flooding made up the lion's share of claims.

Insurers have passed on those costs to customers through premium price hikes, with those affected by the wet weather being hit the hardest last year. 

Separate data from Compare the Market data for the first quarter of 2024 found home insurance for properties that have previously flooded were on average £245, or 117%, more expensive to insure than homes that have not previously flooded. Typical insurance premiums for the former rose to £454 in January to March this year.

The rising cost of materials and labour needed for repairing and rebuilding damaged homes has also pushed up the cost of settling claims. Figures from the ABI revealed the value of claims being paid out by insurers jumped by nearly 10% to £2.55bn in 2023.

• Find out more: does home insurance cover flooding?

Ways to save on home insurance

The cost of home insurance may be rising, but there are several ways to mitigate any premium price hike:

1. Shop around

This should always be your starting point. But with so much choice, deciding which insurer is right for you can be hard. 

Price comparison sites that allow you to view multiple quotes at a glance are a good place to start. The main ones for insurance are Compare the Market, Confused.com, GoCompare and MoneySuperMarket.

To get a clearer idea of how different home insurance policies compare, you could also take a look at our guides on the best contents insurance and buildings insurance. We've rated policies from dozens of insurers to help you choose the right cover.

2. Don't automatically renew

Never agree to the auto-renewal clause included in your 12-month home insurance agreement. This means that once your initial one-year contract lapses, you will be automatically enrolled for another year.

Instead, use the best quotes you've gathered to negotiate with your insurer and take your new business elsewhere if it doesn't improve its offer.

3. Renew early

If you leave arranging home insurance until the last minute, generally speaking, insurers are likely to charge you more than if you bought the cover a few weeks in advance of the cover starting.

Try buying your insurance weeks (rather than days) ahead of the policy going live. 

4. Pay annually

Paying by the month for your cover can make it more manageable within your budget, but it can be the most expensive option overall. 

You're effectively borrowing the year's premium to repay in instalments. This typically comes with interest, hiking your annual cost.

5. Cheaper isn't always better

Opting for the very cheapest policy you can find won't necessarily save you money in the long run.

If your policy comes with steep excesses or significant exclusions, you'll feel the pinch when it's time to claim. This means it's vital you check the policy details carefully before buying the cover. 

• Find out more: how to find cheap home insurance

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