Last year the average premium for Buildings Insurance went up by 1% to just over £205 and the average for Contents Insurance rose by 2% to £151. But within the market we’ve seen some much bigger rises – for example, Norwich Union pushed up its premiums by 6%.

So what’s happening? We seem to see premiums rising year after year. Surely with the home insurance market being so competitive, you wouldn’t expect to see such inexorable price rises?

Lets look at the situation.

The average cost of claims under the buildings part of the insurance always rises in line with the cost of rebuilding your house. That’s a reflection of the rising price of labour and building materials. So as these costs rise, so do your premiums. And there’s also the fact that cost inflation also affects the insurance companies own operating costs. They are bound to add a little extra on for that!

Then there’s the British weather. We don’t live in a hurricane zone as Michael Fish would be the first to point out, but nevertheless it’s a fact that storms and especially floods, are becoming more frequent problems. Flood damage is particularly destructive with the average insurance claim in the £15,000 to £30,000 range. (Source: Association of British Insurers). And during the last 18 months we have seen particularly destructive floods create headline news at Helmsley in North Yorkshire, Carlisle, and Boscastle in Cornwall. Those events cost the insurers multi-millions.

The cost of burglary is also rising with the average claim now around £1,400. The main reason is two fold - burglars seem to find their pickings easier to come by and sell on. It seems to be down to the valuable electronic gismos that families are buying – the laptops, I pods, digital cameras, flat screen TV’s and the like. The other reason is that burglars are increasingly targeting well-off neighbourhoods.

Against this background the insurers are now able to price home and contents insurance by postcode. This means that if their records show up a problem with flooding or an increasing incidence of burglary in you immediate area, their computers will weight your premium to reflect the extra risk.

To a certain extent, any no-claims discounts will help to offset these upward pressures. But don’t forget that your no-claims discount is capped after five years so after you’ve built up the five years, all the increases will land totally in your lap.

So what can you do to lower the amount you pay?

The biggest by far, must be to shop around every year for the best available deal. This may seem a chore, but thirty minutes on the Internet (including this web site!) should yield you results. Online customers usually qualify for an additional 10% discount and you can also agree to pay by direct debit – that can also trim off a bit more.

Then there are other things you can do, especially in the arena of home security. Install security locks on your windows, up-grade the locks on your doors, fit external security lighting, get a burglar alarm and join the local neighbourhood watch scheme. These will all earn you discounts but most will cost you money! Perhaps the peace of mind alone will be worth the expense. Only the local neighbourhood watch scheme comes free!

The good general rule is not to stick with the same insurer too long. Keep them on their toes as the rewards for loyalty don’t seem to last forever and your custom can all too soon be taken for granted.

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