Rising premiums and what you can do about them

In brief

A premium is the price of a risk, and that price follows the cost of putting things right. Since 2024, three developments have pushed those costs up. The first is the cost of repair: building materials, labour, car parts and the electronics in modern vehicles have become more expensive, so that the same damage costs more than it did a few years ago. The second is the claims burden from the weather: storms, hail, extreme rainfall and heat lead to more and larger claims. The third is the indexation of sums insured, on which more below.

That indexation explains why your premium rises even though you have made no claim. With buildings and home contents insurance, the sum insured moves each year with an index for building and contents costs. A higher rebuild value automatically means a higher premium, because that sum is the basis for the calculation. That is not a disguised increase but a necessity: without indexation, underinsurance arises and less is paid out proportionately when there is a claim. The cost of reinsurance — the cover insurers buy in themselves for major events — has also risen, and that is passed on in the rates.

What does that mean for you? Above all, that the reflex to steer on premium can backfire. The cheapest policy is often the policy with a narrower form of cover, a higher excess or without a guarantee against underinsurance. Anyone who economises on that shifts the risk to themselves at the worst possible moment. Comparing does pay off: rate increases differ widely by insurer and by risk, and on every general insurance premium you also pay 21% insurance premium tax.