Competitive home insurance premiums fell by 4.4% in the year to September 2026, although rising claims costs and weather-related risks could lead to increases towards the end of the year, according to Defaqto.
The latest Market Pricing data shows that the average of the five most competitive quoted premiums for combined buildings and contents insurance is now 16.9% lower than two years ago.
Prices declined by a further 2.4% during the third quarter, with monthly falls of 1.0% in July, 0.9% in August and 0.4% in September.
Although premiums have continued to fall, the slowing pace of reductions suggests the market may be approaching a period of greater stability. A temporary increase in June has not developed into a sustained reversal of the downward trend.
CLAIMS COSTS PUT PRESSURE ON INSURERS
Defaqto warned that insurers face difficult pricing decisions as competitive pressures coincide with uncertainty over future claims expenditure, particularly losses associated with extreme weather.
Stephen Kennedy, director at Defaqto, said: “Competitive home insurance premiums are almost 17% below their level two years ago and are still falling. That creates a difficult balance for insurers when inflationary pressures and uncertainty over claims costs remain.
“Weather-related claims are a particular concern for home insurers. Subsidence following dry, hot summers can take time to emerge, while flooding and storms add further uncertainty.
“Pricing decisions need to account for claims that may develop over time, as well as those already being reported.”
Kennedy said insurers needed to consider whether continued reductions in premiums were sustainable in light of their anticipated claims liabilities.
He added: “There is an argument for premium increases to reflect those pressures. Continued market reductions should prompt insurers to examine whether their pricing adequately reflects the claims costs they expect to incur.”
SUBSTANTIAL DIFFERENCES BETWEEN PROVIDERS
While the overall market has recorded falling premiums, Defaqto’s analysis reveals considerable variation in the pricing strategies adopted by individual insurers.
Over the 12 months to September, changes in competitive premiums ranged from reductions of 20.2% to increases of 12.1%.
Differences were also evident during the third quarter. Some insurers cut premiums by between 0.1% and 15.7%, while others increased prices by between 1.8% and 3.5%.
Francis Luery, product manager at Defaqto, said: “The 4.4% annual fall is a useful measure of competitive market pricing, but individual providers have taken very different paths. Some have made substantial reductions, while others are quoting above their levels a year ago.
“For customers, the variation reinforces the value of shopping around at renewal and comparing the cover, limits and excesses alongside the premium. For providers, it creates opportunities to attract business while increasing the importance of understanding their competitive position.”
PRICES COULD RISE TOWARDS YEAR-END
Defaqto expects the market could stabilise or see some premium increases during the final months of 2026, although its latest figures do not yet indicate a sustained upward movement.
The longer-term outlook will depend partly on how weather-related claims emerge and whether wider inflationary pressures translate into higher settlement costs for insurers.
Kennedy said: “The monthly reductions became smaller during Q3, so we could see prices flatten out or some increases emerge towards the end of the year. I would not expect a major movement over the next few months.
“That said, the outlook for 2027 depends heavily on claims experience. If weather-related losses and wider cost pressures build, more substantial pricing adjustments may become necessary.
“Insurers will need to monitor how those claims develop rather than assume that the conditions supporting continued premium reductions will persist.”
