BBC News
watch One-Minute World News
Last Updated: Monday, 8 October 2007, 15:46 GMT 16:46 UK
Flooding swells insurance costs
Flooding in village near Sheffield
Many parts of the UK were inundated
Home insurance costs have risen at their fastest rate since 1994 after this summer's widespread flooding, according to the AA.

Buildings premiums jumped by 3% in the past quarter, reflecting the estimated 3bn cost of flood damage across much of the UK in June and July.

The deluges also pushed up prices for home contents and car insurance.

The AA said it expected insurance costs to rise further but noted the increases were lower than many had feared.

Further price rises

It said predictions in the immediate aftermath of the floods that premiums would rise by 15% had not been borne out.

The floods left large swathes of south-west England, the Midlands, Yorkshire and Humberside under water.

We now see the result of that devastation reflected in premiums as insurers meet the cost of drying out and repairing homes
John Close, AA Insurance

Thousands of people were forced out of their homes by the floods and some are still living in temporary accommodation.

The average cost of buildings cover rose 3% to 215.51 between July and September, according to the AA's British Insurance Premium Index.

Contents cover rose 2.3% to 149.9 over the period.

"We now see the result of that devastation reflected in premiums as insurers meet the cost of drying out and repairing homes as well as temporary re-housing of families while their homes were made habitable again," said John Close, insurer relations director at AA Insurance.

Average buildings cover is currently 3% higher than a year ago.

The AA believes this could rise to 6% by the end of the year but it said fierce competition between policy providers should limit future increases.

Car impact

Flood damage has also driven up the cost of car insurance with comprehensive premiums up 1.3% on a quarterly basis and third party fire and theft cover up 3.57%.

Comprehensive cover is now 8% more expensive than a year ago while third party premiums are 4% higher.

The summer's flood damage cost car insurers an estimated 100m.



RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

PRODUCTS & SERVICES

Americas Africa Europe Middle East South Asia Asia Pacific