Why car and home insurance costs are rising while inflation is falling

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Households that have recently renewed their home or car insurance are likely to have been shocked by how much their monthly premiums have increased. But with inflation more than halving, why are insurance premiums still climbing higher?


The average quoted price of home insurance rose by 41.6% in the 12 months to April, with the most commonly quoted price for annual home insurance coming in at between £150 and £199, according to data insights company Consumer Intelligence.


It marks the highest yearly increase since Consumer Intelligence began tracking home insurance prices in 2014.


Householders in London saw the largest increase in home cover quotes in April at 49.9% higher than last year. They were closely followed by those in the South East and East of England where quotes soared by 45.8% and 41.9% respectively.


Overall, quoted premiums have risen by 68.8% since February 2014.


“The market saw inflation during each of the last 12 months. The last three months was the highest recorded in the last 10 years, exceeding the 10% seen in Q3 2023,” said Matthew McMaster, senior insight analyst at Consumer Intelligence.


Customers who previously made claims on a buildings insurance policy were quoted average prices that were 50.3% higher than last year. Those who had not made a claim experienced a slightly lower increase of 40.9%.


19% annual jump in average home insurance premiums

When it comes to prices paid rather than quotes, the average home insurance jumped by 19% or £60 annually in the first quarter of 2024, according to figures from the Association of British Insurers (ABI).


The average home insurance (combined buildings and contents cover) premium paid rose to £375, up from £315 in the first quarter of 2023.


While insurance premium increases seem typically to have followed inflation in the past, they have recently shot up significantly more than the average reported rates of inflation.


UK inflation hit a 41-year high in October 2022, accelerating to 11.1% on the back of rising energy and food prices.


It has since come down to 2.3% in March, the lowest in nearly three years, according to figures from the Office for National Statistics (ONS).

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