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Home insurance price-war 'may not last'

10/10/06

The cost of home insurance has dropped again in the last three months, according to reports, sparking concern that such price cutting may ultimately prove to be unsustainable.
 
In the latest AA British Insurance Premium Index, it has been reported that the cost of both building and contents insurance has fallen in the third quarter of 2006.
 
According to the study, the average quoted premium for household insurance is now £206.42, which represents a drop of 0.33 per cent from the preceding quarter.
 
The shoparound premium, which averages out the price of the three cheapest home insurance policies, fell 0.32 per cent to £138.13.
 
Meanwhile, the average price of home contents insurance fell 2.61 per cent to £148.10, accompanied by a drop in the shoparound premium of 0.75 per cent to £85.14.
 
The ongoing price war between insurance providers may mean that householders are able to find a cheap home insurance quote by comparing the market.
 
However, Kevin Sinclair, managing director of AA Insurance, warned homeowners that the downward trend may be unsustainable and that prices could increase shortly.
 
"There's still little movement in home insurance premiums, despite serious industry concern about climate change," said Mr Sinclair.
 
"Although one or two insurers are beginning to increase their premiums, the market remains ridiculously competitive.
 
"As motor [insurance] becomes less predictable, household insurance is becoming the next battleground and is therefore the next big worry in terms of requiring a big price correction."
 
Last month, students were warned about the importance of taking out home contents insurance for their student digs.
 
Home insurance provider Barclays Insurance warned that young adults, aged 16 to 24, suffer three times the national average number of burglaries.