Skip to main content
A Professional's Perspective

Why Are UK Home Insurance Premiums Rising?

10/June/2024

Shedding Some Light On Home Insurance Premiums

Audio Player: The Rising Cost of Home Insurance Premiums

Home insurance premiums in the UK are rising, and it's not just a minor inconvenience. Whether you're a homeowner, renter, or landlord this upward trend can significantly impact your budget.

As seasoned insurance brokers, we'd like to shed some light on the intricate web of factors contributing to these escalating costs.

The Economic and Environmental Landscape

Inflation:

Inflation is an undeniable force affecting all sectors, and home insurance is no exception. As the cost of goods and services rises, so does the expense of repairs, replacements, and insurance claims, which naturally push premiums higher.
BBC News Article on Inflation (click to expand)
bbc branded image of counting money due to inflation
Prices in the UK rose by 2.3% in the year to April 2024 - the lowest rate since September 2021.

Construction Sector:

The construction industry is facing its challenges. The cost of building materials like timber and steel has soared, and labour shortages are driving up wages. These factors translate into higher rebuilding costs after damage, which insurers must factor into their premiums.
Hitting a wall, the difficulties facing the construction industry. (click to expand)

The UK construction industry is currently grappling with a multitude of challenges that threaten to derail its growth and stability. One of the most pressing issues is the chronic skills shortage, exacerbated by an ageing workforce and a lack of new entrants. This scarcity of skilled labour has led to project delays, increased costs, and a decline in overall productivity.

Another significant obstacle is the rising cost of materials, fueled by supply chain disruptions, geopolitical tensions, and inflationary pressures. The price volatility of essential materials like steel, timber, and cement has made it difficult for contractors to accurately forecast project costs and maintain profit margins. Furthermore, the industry is under increasing pressure to adopt more sustainable practices and reduce its carbon footprint. This transition to greener construction methods requires substantial investment in new technologies and processes, posing a financial burden on many businesses.

  • Construction Enquirer: This industry news outlet regularly reports on the challenges facing the UK construction sector, including skills shortages, material costs, and sustainability issues.
  • The Construction Index: Another valuable resource for news and analysis on the UK construction industry, often featuring articles on the difficulties faced by the sector.
  • Department for Business, Energy & Industrial Strategy (BEIS): The UK government department responsible for the construction industry publishes reports and statistics on the sector's performance and challenges.
BEIS Construction GOV.UK

Contractor looking glum

Climate Change:

Climate change is also playing an increasingly significant role. The UK is experiencing more frequent and severe weather events, such as storms, floods, and subsidence.
2023 was a year marked by bad weather, with the worst weather-related home insurance claims on record at £573m. Most of this was caused by the succession of storms Babet, Ciaran and Debi, which struck in the final three months of last year and caused £352m of damage to homes.

(Source – ABI - The cost of home insurance rises as insurers support customers and battle cost pressures.  | ABI) & Home insurance premiums rise but remain below historic peaks | ABI )
The Climate Change Premium: How Extreme Weather is Reshaping UK Home Insurance Costs (click to expand)

1. Introduction:

  • Rising Costs: UK homeowners are facing a significant surge in home insurance premiums. According to the Association of British Insurers (ABI), home insurance costs have increased by 25% in 2023 alone, leading many to question, "Why is home insurance so expensive in the UK?" UK homeowners are facing a significant surge in home insurance premiums. According to the Association of British Insurers (ABI), home insurance costs have increased by 25% in 2023 alone, leading many to question, "Why is home insurance so expensive in the UK?"
  • Climate Culprit: While inflation and global events play a role, climate change is emerging as a major factor driving these escalating costs. The UK is experiencing more frequent and intense storms, floods, and heatwaves, leading to a surge in claims and forcing insurers to reassess risks and pricing for home insurance policies, making it crucial to understand the impact of climate change on home insurance. The increase in premiums has left many wondering, "How much has home insurance increased in the UK?"

2. The Science Behind Climate Change and Extreme Weather:

  • Warming Trends: The UK's average temperature has risen by 1.2 degrees Celsius since the pre-industrial era, exceeding the global average. This warming trend is directly linked to human activities, primarily the burning of fossil fuels, contributing to climate change-related risks for homeowners. Many are now asking, "How does climate change affect extreme weather in the UK?"
  • Extreme Weather Surge: Warmer temperatures fuel extreme weather events. The UK has seen a notable increase in heavy rainfall events, leading to more frequent and severe flooding. As a result, there's growing concern about "how climate change increases flood risk" and "what are the impacts of climate change on UK weather." Storm intensity has also increased, causing widespread property damage. Additionally, heatwaves are becoming longer and more frequent, posing risks to infrastructure and increasing the likelihood of wildfires, all of which impact home insurance claims.

3. The Impact on Home Insurance Claims:

  • Flood Claims Skyrocket: In the past decade, flood-related claims in the UK have seen an overall 10% rise in residential property claims, with £573 million paid out in damages in 2023, £150 million more than in 2022. Storms and heavy rainfall have caused rivers to overflow, overwhelmed drainage systems, and inundated coastal areas, leading to increased flood insurance claims. These events have prompted many to inquire about "how to file a home insurance claim for flood damage."
  • Storm Damage Costs: Storm damage claims have also surged, with insurers facing multi-million-pound payouts for roof repairs, structural damage, and fallen trees. The increasing intensity of storms means that even properties previously considered low-risk are now vulnerable to storm damage claims, leaving homeowners wondering "what to do if your home is damaged by a storm."
  • Risk Reassessment: As claims mount, insurance companies are reassessing risk profiles for properties across the UK. "How are insurance companies assessing flood risk" is a common question among homeowners. Homes located in flood-prone areas or regions susceptible to storms are seeing their home insurance premiums rise significantly. Some insurers are even refusing to cover properties in high-risk zones, leaving homeowners with limited and expensive options for property insurance coverage.

4. The Cost of Repairs and Building Materials:

  • Supply Chain Disruptions: Extreme weather events not only cause immediate damage but also disrupt supply chains for building materials. Storms and floods can damage factories, disrupt transportation networks, and lead to shortages of essential materials like timber, bricks, and roof tiles, impacting the cost of home repairs. Homeowners are increasingly seeking advice on "how to find affordable building materials for home repairs" in light of these disruptions.
  • Increased Repair Costs: These supply chain disruptions drive up the cost of repairs, as materials become scarcer and more expensive. Insurers are passing these increased costs onto homeowners through higher home insurance premiums. Additionally, the demand for skilled labor to carry out repairs often exceeds supply, further inflating costs for homeowners insurance claims, prompting questions like "how do supply chain disruptions affect home insurance costs" and "what are the hidden costs of home repairs after a storm?"

5. Case Studies:

  • Cumbrian Floods: Cumbrian Floods: The devastating floods in Cumbria in 2015 caused over £500 million in insured losses. Homeowners in affected areas saw their premiums double or even triple in the years following the disaster, highlighting the impact of flood risk on home insurance premiums and raising concerns about "case studies of flood-prone areas in the UK."
  • Coastal Erosion: Coastal communities in areas like Happisburgh, Norfolk, are experiencing rapid erosion due to rising sea levels and storm surges. Homeowners in these areas face skyrocketing insurance costs and, in some cases, the prospect of their homes becoming uninsurable due to coastal erosion risks. This has led to increased interest in understanding "how does coastal erosion affect home insurance."
  • Urban Flooding: Urban areas are increasingly vulnerable to flash floods due to overwhelmed drainage systems. Homeowners in cities like London and Birmingham have reported significant premium increases due to their heightened flood risk, prompting questions about "what are the risks of urban flooding" and the need for flood insurance coverage in urban areas.

6. The Future Outlook:

  • Climate Projections: Climate models predict that the UK will experience even more extreme weather events in the coming decades. This means that the upward pressure on home insurance premiums is likely to continue, making flood insurance and storm insurance increasingly important. Homeowners are eager to know "what are the future projections for climate change in the UK" to better prepare for these risks.
  • Adapting to Change: The insurance industry is working on new risk models and pricing strategies to adapt to the changing climate. This could involve offering more flexible policies, incentivizing homeowners to take preventative measures, and developing innovative insurance products to cover emerging risks related to climate change and home insurance. Homeowners are curious about "how is the insurance industry adapting to climate change" and "what are the new home insurance products for climate change risks."

7. Conclusion:

  • A Shared Responsibility: Addressing the rising costs of home insurance requires a multi-faceted approach. Homeowners need to be aware of their risk profiles and take steps to protect their properties. The insurance industry needs to adapt to the changing climate and offer affordable coverage options, particularly for flood insurance and storm insurance.
  • Climate Action is Crucial: Ultimately, mitigating the long-term impact of climate change on home insurance premiums will require global action to reduce greenhouse gas emissions and transition to a more sustainable future, ensuring the availability and affordability of home insurance for all.

References


Global Supply Chain:

Bow of a cargo ship cruising sea green calm seas
The global supply chain hasn't been immune to disruption either. For instance, the pandemic, Brexit, and geopolitical events like the war in Ukraine have created bottlenecks in the supply of materials, driving up prices and ultimately influencing insurance costs.
An in-depth look at how geopolitical events are affecting prices. (click to expand)
graphic depicting world current events and how they affect insurance premiums

Geopolitical Risks and the Global Economy: Implications for UK Home Insurance Premiums

Geopolitical events significantly shape the global economic landscape, with substantial implications for the UK insurance market, including home insurance premiums. While these risks introduce uncertainty, they also present opportunities for growth and innovation. By understanding and effectively managing these risks, insurers can navigate the changing landscape and potentially increase their market share.

Populist Governments, Geopolitical Uncertainty, and Rising Home Insurance Costs

Research reveals a correlation between populist governments and poor economic growth, while economic downturns can destabilise incumbent governments. Geopolitical uncertainty, like the Russia-Ukraine conflict, further amplifies these risks, impacting commodity prices, trade, and investment decisions. This uncertainty poses challenges for insurers, as it becomes harder to accurately predict future trends and assess risk, potentially leading to increased home insurance premiums to cover unforeseen events.

The US-China Dynamic and Its Ripple Effects on Home Insurance

The strategic tension between the US and China, a defining geopolitical conflict of our time, has significant economic consequences. This conflict affects investment decisions, trade flows, and ultimately, economic growth worldwide. For UK insurers with global exposure, these ripple effects can result in increased claims in trade credit insurance, political risk insurance, and related lines. These increased payouts can indirectly contribute to rising home insurance premiums as insurers seek to maintain profitability.

Assessing and Mitigating Geopolitical Risks for Stable Premiums

Assessing geopolitical risks involves understanding their sources and potential transmission channels. Analysing potential outcomes of events like the UK elections helps anticipate policy changes and their economic impact. The insurance sector needs to develop comprehensive frameworks that combine intelligence gathering, analysis, and modelling to assess and mitigate these risks effectively. By doing so, insurers can minimise the impact of geopolitical events on home insurance premiums.

Top Geopolitical Risks in 2024 and Their Economic Ramifications for UK Homeowners

Top geopolitical risks in 2024 include:

  • The Middle East conflict.
  • The Russia-Ukraine conflict.
  • Potential challenges to US democracy.
  • The growing alliance between rogue states.

These events can trigger significant economic disruptions, affecting commodity prices, trade, and financial stability. For UK homeowners, this translates to potential increases in home insurance premiums as insurers adjust their pricing to reflect the heightened risk environment.

Middle East Conflict and its Impact on UK Home Insurance Premiums

The Middle East conflict poses economic risks through potential oil price increases, disruptions to trade routes, and increased costs of goods and commodities. While the direct impact on the UK economy might be limited compared to the Russia-Ukraine conflict, the heightened geopolitical risk could affect investment and trade more broadly. This could indirectly lead to increased home insurance premiums as insurers factor in the rising costs of construction materials and potential supply chain disruptions.

The Importance of Proactive Risk Management in the Insurance Sector for Affordable Home Insurance

Geopolitical risks constantly threaten economic stability and growth. However, the UK insurance market, with its robust risk management strategies, is well-equipped to navigate these challenges. By proactively assessing and mitigating these risks, insurers can protect their balance sheets, maintain profitability, and provide essential cover to businesses and individuals in uncertain times. This proactive approach helps to stabilise home insurance premiums and ensures that homeowners can afford adequate protection even in the face of geopolitical risks.


The Insurance Industry's Inner Workings:

Reinsurers are a crucial part of the insurance ecosystem. They provide insurance to insurance companies. When reinsurers face higher claims globally, they raise their premiums, which eventually are passed on to consumers.
Fraudulent claims are another primary concern. While most policyholders are honest, fraudulent activity forces insurers to recoup losses by increasing premiums for everyone.
Recent Insurance Fraud Cases: A Stark Reminder. (click to expand)

The insurance industry is unfortunately no stranger to fraud, and the consequences for both insurers and honest policyholders are significant.

The Association of British Insurers (ABI) has highlighted several recent cases that demonstrate the variety and impact of fraudulent activity:


  • False Travel Claims: A man received a 16-month jail sentence for submitting 15 fabricated travel insurance claims totaling £75,000, using the identities of his acquaintances.
  • Motor Insurance Scheme: A fraudster was sentenced to four years in prison for cloning a claims management company's identity to orchestrate over 60 fake motor insurance claims worth £26,000.
  • Ghost Broking: A London man profited £50,000 by operating as an illegal insurance intermediary, selling fraudulent motor insurance policies.
  • Pet Insurance Fraud: A veterinary practice employee was caught submitting £37,000 in false pet insurance claims over four years, using policies from six different insurers.
  • Bogus Medical Claims: A man was jailed for making £24,000 worth of fictitious medical claims against three insurers, including submitting fake receipts for non-existent treatments.

The Cost of Fraud

These cases are just a snapshot of the pervasive issue of insurance fraud. Detected fraud alone costs the UK over £1 billion annually. The true figure, including undetected cases, is estimated to be over £3 billion, adding up to £50 to the premiums of honest policyholders.

It's important to remember that insurance fraud is not a victimless crime. It affects everyone by driving up premiums and undermining the trust on which the insurance system relies.


Insurance Regulations:

Looking from behind the screen of a businessman pressing regulation title
Regulations and compliance also factor in. Insurance companies must adhere to stricter rules, and these administrative costs can be reflected in higher premiums.
Insurance Laws 2024: Navigating the Evolving Regulatory Landscape in the UK (click to expand)
AI graphic showing text titles such as compliance and rules
The insurance industry in the UK is ever-changing, with new regulations frequently introduced to address emerging risks and protect policyholders.

Your Property's Unique Profile

Your home's location matters:

  • Location

    Insurers, over the years have built large data sets that can predict where weather related, surface water damage or flooding may occur.

    Border circleDavid Says, "Each property in the UK has a Unique Property Reference Number (UPRN) - See Unique property reference numbers | General public | OS (ordnancesurvey.co.uk) and insurers data is now much more accurate than simply a postcode area."

    Properties located in areas prone to flooding, subsidence, or crime are considered higher risk and will generally have higher premiums.

  • Value
    The value and size of your property are key determinants. A larger, more expensive home will naturally cost more to rebuild or replace, which affects your insurance costs.
  • Security
    Your security measures also matter. Homes with robust security systems, such as burglar alarms and cameras, often qualify for discounts.
Home Insurance Hotspots: Where Your Location Could Cost You a Fortune in Premiums (click to expand)
Did you know that where you live can significantly impact your home insurance rates? It's true! Your postcode can be a major factor in determining how much you pay for coverage.

Why Does Location Matter?

Several factors contribute to home insurance costs varying by location:
  • Natural disaster risk: Areas prone to hurricanes, floods, wildfires, or earthquakes typically have higher premiums.
  • Crime rates: Neighbourhoods with higher crime statistics may see increased insurance costs due to a higher risk of theft or vandalism.
  • Local construction costs: The cost of materials and labour in your area can influence the price to rebuild your home, affecting your premiums.
  • State regulations: Insurance regulations and requirements vary from state to state, leading to differences in average premiums.

Hotspots and Havens: The Pricey and Affordable

Home insurance hotspots, like coastal areas vulnerable to hurricanes or regions with frequent wildfires, are notorious for their sky-high premiums. On the flip side, some areas offer more affordable home insurance rates due to lower risks and less stringent building codes.

The Postcode Price Tag: Revealing the Cheapest and Most Expensive Areas for Home Insurance in the UK

Priciest Postcodes Average Premium
SW - South West London £198.25
N - North London £196.77
HA - Harrow £181.24
E - East London £172.28
SE - South East London £166.97
SL - Slough £166.36
TW - Twickenham £161.59
KT - Kingston-upon-Thames £159.95
BR - Bromley £156.73
EN - Enfield £155.99
CR - Croydon £147.83
HU - Hull £142.92
SS - Southend-on-Sea £141.41
CM - Chelmsford £141.25
RM - Romford £137.63
HP - Hemel Hempstead £136.67
GU - Guildford £134.16
BT - Belfast £130.92
G - Glasgow £130.75
RG - Reading £129.66
Most Affordable Postcodes Average Premium
DH - Durham £97.55
NE - Newcastle £99.63
NR - Norwich £100.82
ST - Stoke-on-Trent £101.46
DY - Dudley £102.77
PL - Plymouth £102.77
BA - Bath £103.36
TQ - Torquay £104.00
CA - Carlisle £104.03
IP - Ipswich £104.03
DL - Darlington £104.61
EX - Exeter £105.28
DE - Derby £105.44
TS - Teesside £105.78
WR - Worcester £106.40
WS - Walsall £106.43
SA - Swansea £106.85
CW - Crewe £107.82
AB - Aberdeen £109.14
WN - Wigan £109.43
Source: MoneySupermarket.com

Mapping the Costs: Understanding Your Risks

Many insurers provide home insurance hotspots maps that can give you a general idea of the risk level in your area. However, it's crucial to remember that these maps are just a starting point. It's always best to consult with an insurance agent to get a personalised quote based on your specific address and property details.

Tips for Saving on Premiums

  • Shop around: Compare quotes from multiple insurers to find the best rates.
  • Bundle policies: Consider bundling your home insurance with other policies, like auto insurance, to get discounts.
  • Increase your deductible: Opting for a higher deductible can lower your monthly premiums.
  • Mitigate risks: Take steps to protect your home from potential hazards, such as installing storm shutters or a security system.
By understanding how location affects your home insurance costs, you can make informed decisions to protect your home and your wallet.

Consumer Choices and Consequences

  • Underinsurance

    Underinsurance is a serious risk. It refers to a situation where your property is insured for less than its actual value. If your property is underinsured, you might need to pay a proportion towards the total cost of any claim, known as average. For example if you are 50% underinsured, insurers will only pay 50% of your claim, unless you have deliberately misled insurers which could lead to a claim being declined in full.

    It is important to note that when insuring your building, the sum insured should represent the cost not only to re-build the property, but also debris removal, professional fees and all other costs. If you have not undertaken a rebuild cost assessment of your home recently, you need to do so.

  • Excess
    The level of excess you choose influences your premium. 'Excess' is an agreed amount you must pay toward a claim. A higher excess means you pay more out of your pocket in a claim but typically lowers your premium. It's a balancing act.
Empower yourself by using a broker to help you shop around for insurance. Brokers can compare quotes from different providers and can uncover substantial price differences and policy options tailored to your needs. Your choices will make a significant difference in managing your home insurance costs.
We'll take a look at other choices you can make to help ease financial pressure. (click to expand)

1. Don't Get Caught Out: Your Mortgage Provider Isn't Always Best

While your mortgage provider might require building insurance, they don't have to be your supplier. In fact, they'll likely charge you over the odds. So, do a quick comparison search to find the top deals before settling.

Top tip: Bundling your home and contents insurance often gets you a discount, but it's always worth double-checking.

2. Loyalty Doesn't Pay: Ditch the Renewal Quote

Sadly, insurance isn't about loyalty. Insurers reel you in with cheap deals, then hike up the price the next year, hoping you're too lazy to switch.exclamation

Home insurance is no different. Never accept a renewal quote without shopping around first. Use comparison tools like This is Money's home insurance comparison tool, powered by MoneySupermarket, to ensure you're getting the best deal.

3. Get Paid to Switch: Cashback on New Policies

Some websites pay you cashback for referring you to insurance providers. It's a simple way to offset some of that hefty premium. Check out sites like Quidco and TopCashback to see how much you could earn.

4. Don't Guesstimate: Get Your Cover Right

Having the right amount of cover is crucial. Over-insure, and you're wasting money. Under-insure, and you could be left in the lurch if you need to claim.

Think carefully about what you'd actually need to replace and how much it would cost. Don't forget those hidden extras like garden tools, attic treasures, and garage gear. Check your policy for single item limits too.

Tech tip: Use a smartphone app to create a detailed inventory of your home.

Border circleStan Says, "There are many great home inventory companies, offering free online platform and mobile app with a comprehensive toolset for documenting your belongings."

5. Pay Upfront: Avoid Monthly Payments

Monthly payments might seem easier, but they cost you more in the long run. Most providers add fees or interest for the privilege of spreading the cost.exclamation Plus, you might miss out on the cheapest deals if you're only looking for monthly options.

6. No Claims? That's a Bonus!

While insurance is there for when things go wrong, it's worth considering if you really need to claim. Sometimes, it's better to pay out of pocket for smaller claims to build up a no-claims bonus, which can lower your premiums in the future.

Remember, even if you don't claim, you still need to tell your insurer about any loss or theft. This includes disclosing previous incidents to new providers to avoid invalidating your policy.

7. Safety First: Beef Up Your Security

Installing extra security measures like burglar alarms, window locks, and security lighting can lower your premiums.expand_more Check with your insurer for any preferred standards.

Other safety measures include safes, time-switch lights, and bars on ground floor windows. Joining a Neighbourhood Watch scheme can also get you a discount.

Remember, the best way to keep costs down is to avoid claims altogether. Consider extra smoke alarms, insulating pipes, and removing trees close to your property to prevent problems arising.


Navigating the Rising Tide

The rising cost of home insurance in the UK is a complex issue with no single solution. However, you can navigate this situation more effectively by understanding the factors at play.
Review your cover regularly, consider increasing your security, and explore different excess options. Knowledge is power in managing your home insurance costs.
Remember, the best way to ensure adequate protection while acquiring a competitive price is to use a broker to assist you in shopping around, compare quotes, and negotiate with insurers on your behalf.

Primo, Tailored Cover, and Expert Quotations

Happy gent driving along after getting his car insurance, sun in his face, window wound down -
Professional Advice
Secure Your Vehicle with Comprehensive Coverage for Complete Peace of Mind on the Road | Primo
park home insurance for park homes like this wooden cladded one
Professional Advice
Comprehensive Insurance Solutions for Your Park Home Ensuring Complete Protection and Peace of Mind | Primo
high-net-worth insurance family enjoying a tropical beach - I don't remember getting an invite
Professional Advice
Cover for high-value homes, art, antiques, jewellery & collections. Protect your assets and financial security | Primo
A model house next to a lightbulb, our home insurance page will shed some light on how we can help you.
Professional Advice
Protect Your Property & Belongings with Quality Insurance Providing Complete Peace of Mind and Security | Primo
A second world war British Spitfire soars into the sky protected by military memorabilia insurance
Professional Advice
Protect Your Collectibles with Specialized Insurance for Comprehensive Coverage and Peace of Mind | Primo
Professional Advice
Comprehensive multi-car, van, and motorcycle insurance tailored for families and individuals, offering convenience and cost savings | Primo
A collection of pristine white vehicles all covered on our single multi-vehicle insurance policy.
Professional Advice
Three or more vehicles? Own cars, bikes, camper or a combination? Insure them all on one simple-to-manage policy | Primo