Financial relief for households as cost of home insurance falls

• The average cost of a new home insurance policy dropped 5.6% in the last three months
• Smaller new business volumes promote competition in the market

Households are getting some cost-of-living relief with home insurance falling 5.6% in the three months to July 2022, according to the latest Consumer Intelligence data.

New rules that came into force at the start of the year to tackle the practice of “price walking” initially saw home insurance premiums skyrocket in the month of January, only to settle back quite quickly – before heading on their current downward path.

These figures come from the latest edition of the Consumer Intelligence home insurance price index, which provides an aggregated view of average insurance premium movements across price comparison websites and key direct insurers. The latest data reveals that the average home insurance premium sits at £145.

“Whilst the FCA’s pricing reforms caused a significant uptick in new business premiums at the beginning of the year, we also saw a levelling out, with more reasonable prices being offered at renewal. This has removed some of the impetus for people to jump ship from one insurer to another, and therefore new business volumes have shrunk.

“The reduced volume of new business customers has prompted increased competition in the market in recent months, primarily led by newer brands unhampered by large back books, helping to largely reverse the steep rise we saw at the beginning of the year.”

Long-term view

Overall, premiums have now fallen by 0.7% since Consumer Intelligence first started collecting data in February 2014.

“Home insurance is usually a very competitive marketplace, which has helped to keep overall pricing down over the last eight years,” says Devonald.

Into the regions

London continues to skew the UK’s average for home insurance upwards.

The average price paid by Londoners for an annual buildings and contents policy is now £203, which is considerably more than the next most expensive areas – the South East (£147) and Eastern (£143) regions.

The North East (£128) remains the cheapest place for home insurance, followed by the North West (£132), South West (£133) and Wales (£133).

Age differences

Under-50s households (£147) continue to pay slightly more for their home insurance, with the over-50s typically paying just £141 for an annual policy.

Both groups saw their insurance costs increase over the last 12 months. However, the over-50s (6.1%) saw premiums rise at a faster rate than our younger under-50s cohort (1.2%).

Property age

OIder homes continue to be more expensive to insure than modern houses.

Victorian-era homes (those built between 1850 and 1895) now typically cost £189 to insure annually, while the cheapest properties are newer builds – the average policy for a home built from 2000 onwards is just £133. There is the odd exception to the rule – homes built between 1940 and 1955 carry premiums of just £136, whereas home insurance costs £145, on average, for properties built between 1970 and 1985.

And it’s the oldest homes in our property age groupings that have also seen the biggest increases to their premiums over the last 12 months – with 7.3% annual price gains for properties built between 1850 and 1895.