What's happening to home insurance premiums?

The cost of home insurance premiums has dropped for the first time since 2022, according to the latest data from Go Compare.

Figures published by the comparison site show that the average quote for a combined buildings and contents policy dropped slightly to £212 in the first three months of 2024, down from £213 the previous quarter. It is still 31% higher than this time last year, though.

The news follows separate figures from the Association of British Insurers (ABI) in May - which is based on prices paid rather than quotes - showing a year-on-year rise of 19% in the first quarter of this year.

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

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What's happening to home insurance prices?

The ABI's latest report, published in May 2024, showed a 19% annual surge in the average combined home insurance premium - from £315 in the first three months of 2023 to £375 between January and March 2024. That's also £11 more than the last three months of 2023, a quarterly rise of 3%.

Released every three months, the ABI's data gives the most accurate picture of the market as it's based on prices consumers are actually paying, rather than quotes, and combines both renewals and new policies.

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

Comparison sites publish data as well, but their figures only reflect quotes given to customers searching for home insurance.

The latest figures from Go Compare - published on 25 June 2024 - suggest the price of home insurance is now stabilising. The average premium quote dropped from £213 in the last three months of 2023 to £212 between January and March 2024.

The comparison site also revealed that while the average cost of buildings-only policies has risen in the first quarter of 2024, from £160 to £167, contents-only policies have reduced slightly, from £67 to £63 this quarter.

Despite the reassuring news, the data shows costs are still 31% higher than the first quarter of 2023, when the average price of a combined home insurance policy was £162. It's also 41% higher than the first three months of 2022, when the average quoted cost of insuring your home was £150.

The report follows research from Consumer Insight, released on 11 June 2024, which found the average quoted price of home insurance was 41.6% higher in April 2024 than the same month last year. It's the biggest jump in premiums since the insurance price experts started tracking costs in 2014.

Homeowners with buildings claims hit hardest

Customers who'd previously made buildings claims experienced the biggest annual rise of 50.3%, followed by a 49.8% price hike for those who'd made water damage claims. 

Theft-related claims also resulted in a 43.7% surge in the cost of premiums, with other damage claims leading to a 46.4% climb. 

In contrast, customers with no claims saw a 40.9% adjustment.

• Find out more: best home insurance

Why is the cost of home insurance so high?

Go Compare's Nathan Blackler blames inflationary pressures and the rising cost of materials and labour for pushing up the price of settling claims. Insurers are passing on these costs to customers through increased premiums.

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

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

• 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, choosing an insurer 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.

But remember, not all providers are on there. Which? Recommended Providers Direct Line and NFU Mutual are examples of this. 

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 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

This article is regularly updated with the latest figures from the ABI and Consumer Intelligence

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