home insurance

£300 million was paid out by home insurers in flood claims last year, however instead of prices rising, this has seen the competition in the home insurance market increase. The June and July deluge of rain last year, severely damaged thousands of UK properties and cost the sector an estimated £3 billion. This prevents insurers claiming back the losses they saw last year by increasing premium prices this year, it seems cheap home insurance policies can still be found.

Datamonitor thinks that many of the costs insurers saw due to the 2007 floods, will be passed on the recoup by the reinsurance industry. However, the analyst went on to say that it estimates that the gross household insurance claims cost over £4 billion last year. The liabilities of many primary insurers could reduce the profit generated by the market from 2006’s figure of £167 million, to an amazing loss of over £300 million in 2007.

A financial service analyst from Datamonitor, Mahreen Hussein, said: “While the market suffered heavy losses in 2007, premium income actually held up pretty well, and as long as premium rates don’t decline in 2008 we are forecasting a return to profit for the household insurance market.”

Datamonitor also saw an increase in the use of Internet price comparison sites to get competitively priced home insurance deals. However it warns that this is leading to people choosing their home insurance policy purely on the price given.

This is boosting rivalry between insurers, and forcing companies to keep their prices down because of the prices other insurers are offering for similar policies. The ability to use these comparison sites such as Only Insurance, means customers can search for the best price they can get from the majority of insurers available on the market.

Premiums increased marginally in 2007, it is thought they didn’t rise by any significant figure thanks to the abundance of competition across the market. The Association of British Insurers said that its member companies dealt with 165,000 claims as a result of the appalling weather last year.

The floods in Yorkshire, Gloucestershire and Worcestershire cost the industry all together more than £3 billion, combined with other events from last year this made 2007 the worst ever year for weather related claims. According to the ABI the average cost of the property flood damage was £20,000, in many cases all of which was covered by a home insurance policy.