The average home insurance policy in the UK rises to almost £400

Unlock Editor’s Digest for free

FT editor Roula Khalaf selects her favorite stories in this weekly newsletter.

The average UK home insurance policy has risen by almost a fifth to just under £400, an all-time high, as insurers raise their prices after paying out a record amount of money in weather-related claims last year.

Annual policies covering buildings and contents reached an average of £396 between May and June, according to data published by the Association of British Insurers on Monday.

The figure marked a 6% increase on the previous three months and was 19% higher than the same period last year, the trade body said.

The data underscores the increasing affordability pressure on consumers as the home insurance sector responds to the worst underwriting conditions in decades. Inflation in insurers’ rebuilding costs and other factors have combined with more severe and extreme weather conditions linked to climate change to increase payouts.

Insurers paid out £1.4 billion in claims to UK home and business owners between April and June, according to the ABI, a record quarterly total since data collection began in 2017.

Last year, UK insurers paid out a record £573m for weather damage after a series of storms.

Louise Clark, a policy adviser at the ABI, said the second quarter claims figures showed the “devastating impact” severe weather can have and reiterated the industry body’s call for change planning and resilience measures to reduce risks .

“Urgent government action to tackle surface water flooding and maintain investment and flood maintenance will also help reduce the future impact of flooding,” she added.

Weather-related claims for households – where insurers paid for damage from episodes such as storms, heavy rain and frozen pipes – were more than £100m for the fifth consecutive quarter, the ABI said. Subsidence payments also hit a quarterly record.

The £396 figure – which is based on paid-up policies rather than comparison quotes like other industry measures – was an all-time high in nominal terms. But adjusted for inflation, it was still below the levels reached in 2017, the ABI said.

The rise in the cost of the average home insurance policy — a crucial financial product for millions that is typically a condition of mortgage loans — follows what consumer groups have called a “crisis” in auto insurance, another staple.

Labor promised to tackle the “rising cost of car insurance” in its general election manifesto, although comparison quotes for car cover have started to fall from historically high levels in recent months.

Paul De’Ath, head of market intelligence at consultancy Oxbow Partners, said home insurance premiums have been slower to respond to rising claims compared to auto premiums, partly because some firms have focused first on fixing problems in their larger auto underwriting operations.

“It’s only now that the market is really raising prices to account for (increasing home insurance claims),” he added.