Climate change to push up home insurance bills 20pc next year
Climate change could push up home insurance costs by up to 20pc next year, according to the UK’s biggest accountancy firm.
Mohammad Khan, head of general insurance at PwC UK, said the increase in the number and severity of weather events means that insurers will need to increase the prices charged to consumers in order to cover the rising cost of claims.
“We are having weather events more often and they are more severe. You can call it climate change or not but that is a fact and insurers have to factor that into their pricing. That is why premiums are going up,” Mr Khan said.
“This is exacerbated by the continuing increase in the cost of materials required to fix houses when events such as storms, water leaks and fires occur. Many customers could be looking at price increases of between 5pc and 20pc.”
Referencing storm Henk, which has left parts of the country flooded this month, he added: “Combined with Storm Babet in October 2023, these losses will be just within many insurers’ expected total weather losses – although for a few it may push them above what they expected.”
Furthermore, due to global instability, materials are taking longer to reach the UK – increasing the amount of time to sort a claim adding more cost.
For example, if you are waiting for your home to be repaired from flooding, an extra week means your insurer will need to pay out more for temporary accommodation.
The average price paid by customers for a combined home insurance policy in August 2023 was £197 a year, according to GoCompare. A 20pc rise would see the yearly cost increase to £236.
There have been ten storms over the United Kingdom since September – the start of the storm season, according to the Met Office.
A typical storm season brings six or seven named storms. The 2023-24 storm naming season is now just one name away from equalling the 11 storms recorded in 2015-16, with over seven months to go.
In the UK a storm will be named when it has the potential to cause disruption or damage which could result in an amber or red weather warning.
PwC estimates that as many as 2,000 homes were impacted earlier this month by Storm Henk, resulting in around £150 million worth of damage. The average insurance claim for flooding is around £22,000, according to the Association of British Insurers (ABI).
Nearly a quarter of people are not currently protected by a home or contents insurance policy, despite 38pc living in areas susceptible to flooding or other extreme weather events, according to AXA UK research.
Car insurance premiums are also expected to rise by around 2.5pc to 7.5pc over the next year, PwC’s head of insurance said.
Motor insurance hit record highs last year, with drivers paying an average premium of £511 for private comprehensive motor insurance between April and June last year, up 21pc compared to the same period in 2022, according to the ABI.
