Home insurance premiums are continuing to fall, according to the AA’s latest benchmark British Insurance Premium Index, for the third quarter of 2013.

Average Shoparound quoted premiums for building, contents and combined policies have all fallen, continuing a generally downward trend that started at the beginning of 2012.

The average were:

• Buildings: £129.44, down 0.8% over the quarter and 5.8% over the 12 months to 30 September 2013
• Contents: £69.28, down 1.8% over the quarter and 3.8% over 12 months
• Combined buildings and contents: £127,86, down 1.7% over the quarter, 6.6% over 12 months

Simon Douglas, director of AA Insurance, said that a year of relatively benign weather has meant that there has not been an influx of major claims despite some localised flooding and storm damage and that is reflected in premiums.

He said: “I believe that it would take a very severe winter to reverse the downward trend in the short term,. We are in a competitive market and rate reductions are still being made but in the longer term, major flooding for example could lead to sharp premium rises, particularly for buildings cover.  This is what happened after the 2007 floods.  Otherwise, I believe that home premiums will continue to offer good value for money.”

Douglas explained that flooding remains a concern for insurers:  “Consultation on the  Flood Re solution arrived at by the Government and the Association of British Insurers, which aims to protect homes at greatest risk of flooding, ended on 20 September.

“However, the measures proposed appear complex and onerous for insurers.  There are also controversial exclusions such as small businesses (including bed and breakfast premises which, after all, are also homes for their owners) and properties built after 2009.

“Flood Re will protect half-a-million homes in the worst-affected parts of Britain but will exclude many others that are at reduced, but still very real, risk of flooding. They will find it more difficult to find insurers willing to quote and, ironically, they may be asked to pay more than those that fall within the Floor Re provisions and are at higher risk, because they won’t benefit from subsidies from the market as a whole.”

“Already this month we are seeing some localised extremes of weather causing flooding in places with no previous record of flooding. Flood Re will do nothing for them.”

Douglas pointed out that many organisations made submissions during the consultation, noting that uncertainty remains on the scope of the measures proposed.

“Ultimately, because Flood Re will require cross-subsidy from the home insurance market as a whole, premiums for everyone are bound to be affected.”