Floods send home insurance to record high

Home insurance premiums have risen to their highest level in more than a decade, following the flooding that ravaged parts of the country last summer, new figures from the AA show.

Average quoted premiums for home buildings insurance rose by 1.4 percent to an average of 218.60 pounds for an annual policy over the past quarter -- the highest level since the AA started its British insurance premium index in July 1994.

That follows a rise of 3 percent in the previous quarter - the largest single increase since the inception of the index.

Home contents premiums rose by a more modest 0.4 percent in the three months to January, taking the cost to an average annual 150.57 pounds.

The rises reflect the 750 million pounds-worth of domestic property claims following the worst flooding in the country in 60 years in some parts of England last summer, which forced 14,500 families into temporary accommodation.

"The average cost of each of these claims is approaching 52,000 pounds," says John Close, insurer relations director at the AA.

"Buildings insurance premiums are at their highest since the index began, but I'm surprised that premiums have risen so little over the past quarter."

He urged the government to include "robust provisions" in its Climate Change Bill to ensure new buildings are more flood and storm resilient, particularly in light of the renewed flood threats this month.

"Local authorities must also think through where new housing is built: it will help no one if families find their homes are uninsurable because of where they are located," Close added.

Price comparison Web site Gocompare.com said the data "sets the tone for the year ahead".

Managing director Hayley Parsons said: "Claims inflation has been running ahead of premium increases for the past couple of years, which is clearly an unsustainable stretch for insurers in the long term.

"These figures show that the elastic is beginning to fray and we should expect premiums to rise throughout 2008."

The AA, perhaps better known for its motoring activities, said car insurance premiums have also risen in the past quarter: comprehensive by 2.4 percent and third-party, fire and theft by 1.4 percent.

The index averages premiums from up to 85 motor and 37 home insurance companies and schemes based on a basket of 1,000 car and 750 home risks.