The cost of protecting one’s home in the United Kingdom has reached an unprecedented level, with the average combined buildings and contents insurance policy now standing at a staggering £396 per year. This alarming figure, recorded between May and June, represents a 6% increase from the previous quarter and a shocking 19% rise compared to the same period last year, according to data released by the Association of British Insurers (ABI).
The steep increase in home insurance premiums can be attributed to a combination of factors, including the escalating cost of rebuilding due to inflation and the growing frequency and severity of extreme weather events linked to climate change. As a result, insurers have been forced to pay out record-breaking sums to policyholders, with weather-related claims for households exceeding £100 million for five consecutive quarters.
In the second quarter of this year alone, UK insurers paid out a staggering £1.4 billion in claims to homeowners and businesses, marking the highest quarterly total since the ABI began collecting data in 2017. Last year, the industry faced its worst underwriting conditions in decades, with a record £573 million paid out for weather damage following a series of devastating storms.
The ABI has called for urgent government action to address the growing risks associated with climate change, particularly in relation to surface water flooding. Louise Clark, a policy adviser at the ABI, emphasised the need for planning changes and resilience measures to mitigate the impact of adverse weather events on homes and businesses across the country.
The rising cost of home insurance has placed an additional burden on consumers who are already grappling with the challenges of the current economic climate. As premiums continue to climb, there are growing concerns about the affordability of this essential financial product, which is typically a requirement for mortgage borrowing.
The home insurance sector’s response to the escalating claims has been slower compared to the motor insurance industry, where premiums have also reached historic highs in recent months. However, as the market adjusts to the new reality of increased risks and costs, it is likely that home insurance premiums will continue to rise in the foreseeable future.
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