Although they may live miles from a river or coastline, many Britons could be paying sizeable sums for household insurance to protect other people's homes against a risk of flooding in an era of dramatic climate change.
By Jeremy Gates
This intriguing thought emerges from the Automobile Association's British Insurance Premium Index, which has tracked home insurance premiums since 1994.
The AA confirms a "dramatic" 22% surge in the Shoparound index (an average of the three lowest premiums for each risk quoted in the Index) since last year's floods.
"The days of cheap home insurance deals may be numbered," says AA Insurance director Simon Douglas.
"I believe the sharp rise over the past year indicated by the Shoparound index for buildings cover suggests insurers offering the lowest premiums have revised rates to take account of predictions of more frequent flash flooding events."
Douglas thinks insurers are responding to new mapping from the Environment Agency, which considers risks of sudden flooding as a result of heavy rainfall that can overcome local drainage systems and hit thousands of homes.
"Last year insurers dealt with 180,000 flood claims in 23 counties, paying £3bn in claims," he says.
"Around half of those were in areas not known to be prone to flooding."
AA Insurance says the average buildings premium in July was £209.52, while contents cover was £128.69. Combined cover came in at £299.42.
Measured on price alone, the Shoparound premium produced a figure of £126.29 for buildings and £72.41 for contents. The average cost of combined cover was £192.87.
It's not just floods that alarm home insurers. Church spires in Lincolnshire wobbled in February in Britain's biggest earthquake for nearly 25 years, and tremors touched Wiltshire and Newcastle-upon-Tyne. Chimneys crumbled in Folkestone, Kent, in April 2007 for the same reason.
Even before the AA suggested millions of homeowners could get bills for climate change that they might not deserve, it was clear that home insurance is a competitive market place.
The Post Office, which entered the market in November 2004, looked particularly cheap in early 2008. Its policies offer separate or combined home and contents cover, with a Home Assistance option providing 24-hour assistance for emergencies like burst pipes and blocked drains.
At present, buyers of a Post Office insurance policy get £50 cash back (for buildings and contents cover combined) and £25 for a single policy. But Post Office premiums have slipped down the league table of cheapest providers at financial website moneysupermarket.com.
There are also discounts at Nationwide BS, which has lifted home insurance sales by 29% in a year. Until August 31 it's offering a 20% discount for this year and next on combined buildings and contents cover, and another 10% off for those buying online.
Of course, if a claim has to be made, quality of cover - and level of excess - tend to be more important than price.
Sainsbury's Home Insurance, which includes cover for up to £500 against bikes being stolen, says 16% of the claims it has settled since 2004 concerned thefts from home, and 84% on thefts away from the home.
Had be been insured with Sainsbury's, Tory leader David Cameron wouldn't have batted an eyelid about losing his bike.
All these points - and particularly the cover for expensive electrical items like home computers, laptops, VCRs and TVs besides items like replacement locks and keys - need to be considered alongside price when a policy is chosen.
But the comparison site Gocompare.com claims the difference between average price and cheapest home cover is as wide as 45% - meaning customers who shop around can get three years' cover for the price of two.
At rival comparison site Confused.com, product director Simon Lamble says: "Customers save an average £193.81 on home insurance on our site, but many people never change their insurer out of loyalty.
"Renewal premiums should really decrease year-on-year, unless the policy is affected by changes such as adding an extension, so it's important to shop around for the best price."
Traditionally, cost-conscious consumers who might change car insurers each year take less interest in home insurance.
Peter Gerrard at moneysupermarket.com says insurance "is not a sector in which certain providers invariably appear as a best buy.
"Applicants in identical houses giving different answers to one specific question get a wide variation in premiums quoted," he says.
However there is one new option for financially aware consumers who rarely claim on home insurance: Lloyds TSB Insurance's Personal Home Plan is tailored for older folk in safe suburbs.
Lloyds TSB sales director Alasdair Lenman says the product idea was triggered by a comment from an 80-year-old customer who questioned why her policy included bicycle cover when her cycling days were long gone.
"Personal Home Plan fundamentally changes the way the over-50s buy insurance, enabling us to offer more tailored premiums and treat customers as individuals. We see a market of around three million discerning shoppers who don't want standard off-the-shelf cover," Lenman says.
With essential cover for fire, theft, flood and subsidence as standard, Personal Home Plan offers applicants any combination of 21 'pick and mix' options - including garage or shed contents, and 'matching contents' cover, so that if a sofa is damaged, an entire three-piece suite is replaced.
Lloyds TSB might be trying to recreate the "cherry-picking" formula that Esure pioneered in motor insurance.
By attracting mature consumers who are less likely to claim, it offers lower premiums - and also a 50% discount for homeowners who haven't claimed for 10 years or more. Customers can also opt to protect their 'no claims' bonus.
"The savvy customer typically claims as a last resort and they've told us they want to be rewarded for careful behaviour," Lenman says.
Age discrimination laws mean Lloyds cannot refuse the policy to younger applicants. But things might work out that way, anyway.
"Age may be a critical ingredient on Lloyds TSB's policy," Peter Gerrard at moneysupermarket.com says.
"When I applied as a 29-year-old, the policy wasn't much better than many others.
"When I tapped in as 50-plus, it became an excellent buy."
It will be interesting to see if the new Lloyds TSB strategy delivers good value over the long term. If it does, rivals might have to rethink their approach.
INFORMATION: Sainsbury's Bank Home Insurance (0800 731 7978 and www.sainsburysbank.co.uk); Lloyds TSB Insurance Personal Home Plan (0800 022 4789 and www.lloydstsbinsurance.co.uk/over50s).
This year, both Moneyfacts.co.uk and uSwitch.com have added home insurance to their price comparison services. Post Office offers a home insurance quote and policy over the counter at 200 UK branches.
POUNDNOTES
:: With the 2008 Olympics set to arouse strong interest in China, Barclays Stockbrokers is offering a new Investment Note to give investors access to growth opportunities in Chinese equity markets and agricultural commodities.
Investors can put in a minimum £500, in either an ISA or a SIPP if required. If held over a minimum five-year period, the Note offers capital protection with a guarantee that investors receive 125% of any rise in the value of the basket over that period.
Alternatively investors can sell the Note before maturity to realise short-term gains. There is no guarantee, in that case, that their original investment is returned in full.
Barclays Stockbrokers enquiries: 0845 300 9040 and www.stockbrokers.barclays.co.uk/in.
:: As mortgage rates fall, HSBC's new 5.98% five-year fixed rate mortgage (available to all HSBC Plus or Premier account holders with a booking fee of £999) lines up alongside market-leading discount and tracker mortgages as low as 4.99% for two years.
But personal loan rates are going in the opposite direction. Esther James at Moneyfacts.co.uk says 14 lenders upped loan rates in the last month, with two lenders - AA and Tesco Personal Finance - increasing rates twice.
This means borrowers must think carefully about how much they take.
"Abbey has increased rates by 5% to 12.9% on loans below £4,950," James says.
"If a consumer borrows £4,950 from Abbey, it costs £165 per month, totalling £5,940 over three years.
"At £5,000, the rate drops to 7.9%, costing around £156 per month - a total repayment of just £5,616, more than £300 less."
HSBC mortgage enquiries: 0800 169 6333.
:: High savings rates make this is a good moment to put aside cash for children.
Andrew Hagger at Moneynet.co.uk says £20 a month invested in an account earning 6% adds up to a lump sum of £7,656.28 in 18 years.
For savers in Child Trust Funds (CTFs), Hagger tips Hanley Economic BS at 7.75% and Britannia BS at 7%.
If you don't want to lock away money for 18 years, more flexible accounts for toddlers include Halifax Save 4 It at 5.55% and Chelsea BS Ready Steady Save (5.45%).
:: Kaupthing Edge, the online subsidiary of Iceland's largest bank, has upped the rate on its instant savings account to 6.55% AER, following recent increases on its 12-month and 36-month fixed term accounts to 7.15% AER.
Savers can open a Kaupthing Edge instant access account with a minimum investment of £1, with £100 minimum balance required to earn interest.
Enquiries: www.kaupthing-edge.co.uk.
:: HIGH FIVE SAVERS:
Phone No Rate Account Period Deposit Interest paid
ICICI Bank UK www.icicibank.co.uk 7.20% (F) HiSAVE Fixed Rate 12 Month Bond £1,000 OM
FirstSave www.firstsave.co.uk 7.10% (F) Fixed Rate Bond One Year £1,000 OM
Heritable Bank 0845 607 1212 6.60% 60 Day Notice Issue 2 60 Days (B) £1,000 Yly
Whiteaway Laidlaw Bank Ltd 0161 833 5444 6.56% 60 Day Bonus 60 Days £1,000 Yly
Anglo Irish Bank 0845 455 2222 6.55% Seven Day Notice 2 Seven Days (B) £1 Yly
:: TOP FIVE BORROWERS:
Phone No Rate Period Max% Adv Fee Incentive
HSBC 0800 494 999 5.69% (FTB) for two years 90% £249 Yes
Norwich & Peterboro BS 0845 300 2522 5.70% for term 90% £999 Yes
First Direct 0845 610 0100 5.95% for three years 80% £598
HSBC 0800 494 999 5.99% (FTB) for term 90% None Yes
Co-Op Bank 0800 633 5286 6.09% for three years 90% £899
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T- Operated by Telephone
*W- Operated by Internet
*H- Operated by Internet/Telephone
*S- Available only to those aged 50 or over
*R- Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice)
