Home insurance premiums set to rise

Flooding has become a familiar feature for many areas

Homeowners are likely to see their insurance premiums rise as a result of last years floods.

Insurers are facing an estimated £15bn bill for flooding claims across Europe during 2002.

The whole insurance industry is having to shoulder the burden of massive cumulative claims that will inevitably feed through to homeowners

Jennifer Weller, Biba

Average premiums for buildings and home contents cover is estimated to rise by 10% during 2003 according to the British Insurance Brokers' Association (Biba).

This follows average rises in premiums during 2001 of 7-9%.

Average premiums for home contents cover are expected to rise to £158 from £144.

The average buildings cover premium is predicted to face a similar hike to £185 from its current level of £168.

Cumulative claims

The total cost to insurers of homes and businesses from flooding in the UK during December is an estimated £100m.

However, any premium rises in 2003 will reflect the cost of covering claims resulting from the floods in Germany and Central Europe last summer.

"The whole insurance industry is having to shoulder the burden of massive cumulative claims that will inevitably feed through to homeowners in the form of higher premiums," said Jennifer Weller, head of communications at Biba told BBC News Online.

The costs of the most recent floods in the UK may not be passed on to customers until 2004 as a result premiums are predicted to rise above inflation again.

Grim prospect

Some homeowners face the grim prospect not getting cover at all as an agreement between the government and the insurance industry, guaranteeing cover for homes at risk of flooding in return for flood defence improvements, has come to an end.

The Association of British Insurers (ABI) has advised its members that although they should aim to offer insurance wherever possible, from the new year premiums charged will reflect the risk of flooding.