12th November 2015
Home insurance premiums are continuing to fall with the average price dropping 5.8% to £114 in the year to September, but price increases could be on the horizon when a tax rise kicks in.
Analysis by Consumer Intelligence shows that the five most competitive policies shows have dropped 12.9% since February 2014 – but the pace of the premium falls has slowed dramatically with prices falling just 1.7% in the past three months.
The Government’s decision to increase Insurance Premium Tax which took effect from November 1 means price rises are possible the next time customers renew.
Customers aged over 50 pay the lowest annual premiums on average at £106 while the under-50s pay £122 a year, the research which is based on data developed by Consumer Intelligence which is used by the Office of National Statistics to calculate official inflation statistics.
However, under-50s saw slightly bigger average falls at 6.5% compared with 5.2% for over-50s.
The increase in insurance premium tax from 6% to 9.5%, which is expected to raise nearly £1.5 billion for the Government, will bump up premiums for home, motor, breakdown, buildings, pet, private medical and mobile insurance. Research shows that 56% of customers will switch or consider switching due to tax rise while 27% of customers will cancel policies and/or reduce cover.
Ian Hughes, chief executive of Consumer Intelligence says: “The fall in home premiums has been driven by a big reduction in burglaries, and far fewer claims for flood and storm damage thanks to recent milder weather.
“But that looks likely to be blown off course by the rise in the Insurance Premium Tax this month which could reverse all of the recent falls in average premiums.
“That makes shopping around for home insurance and haggling with your existing insurer even more important to ensure your costs remain competitive.”