How insurance works
To work out the price of your insurance, we weigh up several factors. Some factors are specific to you, including the chances of you making a claim. Other factors are to do with the world around you and what’s happening in the insurance market.
Every customer pays into a central pot, and if you make a claim we pay it out of that pot. If lots of people claim at once, the pot has to go further, which means prices go up. But whatever happens, we constantly review the way we calculate the cost of home insurance so we can make sure you get the best price.
On this page, we’ve explained these factors and how they affect your price.
At a glance, where your money goes 1.
For a new customer, over the lifetime of their policy, we expect their premium to be split as follows.
- 66% Claims costs – the amount Aviva pay out in claims
- 22% Operating and marketing costs such as contact centres and online support
- 12% As a result of Insurance Premium Tax
Claim costs count for the majority of our outlays. Here’s a breakdown of the cost of home-insurance claims
- 32% Escape of water
- 27% Fire and theft (including burglaries)
- 19% Freeze, flooding and storm damage
- 12% Own damage
- 10% Other, including subsidence
How you affect your price
Where you live
Public data on your property’s local area is used to rate your address and set your personal price. Factors include the average claims cost and future claims we expect in your neighbourhood. If claims in your area go up it may cost more to insure your home.
Any past claims
To work out your price, we factor in your claims’ history, which includes any accidents, claims, or losses in the last 5 years. The fewer the past claims you have, the lower you can expect your premium to be.
Your home’s build
How your property is built is likely to affect your price. Based on greater risk of fire-damage, wooden features, such as timber frames, may raise your premium. Any non-standard building materials that may cost more to source or repair will have the same effect.
How events affect your price
Long cold or wet spells can burst pipes and damage homes. Plus, we regularly review the chances of flooding driving up future claims. The Government works with insurers, including Aviva, to make sure residents in flood areas can get their homes insured. This has driven the Flood Re initiative.
Rising repair costs
From TVs to tablets, state-of-the-art kitchens to lighting, the items in your home get ever dearer. Naturally, it’s also getting dearer to fix them, which increases the cost of providing insurance and the price you pay.
Changing claims market
If the variety of claims we receive changes, so to do our prices. We estimate how much we’re likely to pay in future claims, and factor this cost into your premium. Escape of water claims make up a large part, costing an average £2,900 in 2016.
Number of claims
Rises in claims can drive up prices. In 2016 we paid out £2.7 billion to over 775,000 UK customers. That's on 96% of claims across motor, home, travel, protection and health. As of 1 December 2019, and shown on our website, claims ratings and reviews by customers buying or claiming on our home insurance averaged 4.5 out of 5.
Insurance Premium Tax increase
Each price includes Insurance Premium Tax (IPT). In 2016 the Government announced a rise in IPT from 9.5% to 10%, so all prices went up accordingly. A further IPT increase to 12% was implemented in June 2017.
You can access our products in different ways. Your premium includes costs for current services, such as contact centres and online support, and for investing in future products and services.