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Your home insurance price explained

The cost of your home insurance is based on your personal circumstances, such as the likelihood of you having to make a claim. It’s also affected by universal factors that are a result of the world around you, like severe weather. On this page you can explore in more detail how they impact your price.

Why do prices increase?

If you make a claim, we pay it out of the single pot that all our customers pay into. If lots of people claim at once, that pot has to go further – which means prices go up. But whatever happens, we constantly review the way we calculate the cost so that we can make sure you get the best price.

How you affect your price

There are numerous factors specific to you that we use in calculating your price.

How the world around you affects your price

Many factors influence insurance prices, in addition to your personal details.

Price breakdown

For a new customer, over the lifetime of their policy, we expect their premium to be split in the following way:

  • 74% = Claims costs – the amount Aviva pays out in claims
  • 13% = Operating & marketing costs such as contact centres and online support
  • 11% = Insurance Premium Tax
  • 2% = The profit that Aviva makes

As you can see, claims make up the biggest part, so here’s a breakdown of the cost of home insurance claims:

  • 35% = Water leaks
  • 6% = Storm
  • 17% = Theft including burglaries
  • 14% = Fire
  • 13% = Accidental Damage e.g dropping a tin of paint on the carpet
  • 6% = Flood
  • 1% = Freeze/frozen pipes
  • 3% = Subsidence
  • 5% = Other

Source: Calculations based on 2016 Aviva direct home insurance policies.

Where you live

We use public data about the area surrounding your property to rate each postcode and address individually, which is reflected in the price you pay. Several factors are taken into account, including the average claims cost and the future claims we expect to see in your neighbourhood. Increased claims in the local area will mean that it may cost more to insure your home.

Your previous claims

To generate your price we take into consideration your claims history, which includes any accidents, claims, or losses in the last 5 years. The fewer previous claims you have, the lower you can expect your premium to be.

Building materials

The way your property’s been built is likely to affect your price. Mainly, it comes down to the fire risk, which means if your property has wooden features, such as timber frames, your premium may be higher based on the increased risk of fire damage. Likewise, any use of non-standard materials that may cost more to source or repair could also result in a higher premium.

Severe weather

We all know how extreme weather can affect the UK. Prolonged periods of cold weather or rain can damage homes – most often resulting in burst pipes. However, it’s flooding claims that have really risen over the past few decades and, like other insurers, we regularly review the likelihood of future claims resulting from it. To help people within flood regions the government has worked with the entire insurance industry to make sure people who live within flood areas can get their homes insured. We’re very much part of that push to make sure everyone can enjoy the protection they need. This has resulted in the initiative Flood Re.

Repair costs have gone up

From TVs to tablets, state-of-the-art kitchens to lighting, the products in your home are getting ever-more expensive. Naturally, it’s also getting more expensive to fix them, which increases the cost of providing insurance and the price you pay.

Change in the nature of claims in the market

If the variety of claims we receive changes, our customers’ prices will also change. For example, the average cost of ‘escape of water’ claims was £2,900 in 2016. If that figure went up or down, it’s likely home insurance prices would too. We estimate how much we’re likely to pay in future claims, and incorporate this cost into customers’ prices. Escape of water makes up a large part of your premium.

Number of claims

We settle thousands of claims each month. If the number of claims increases, for example due to extreme weather events, such as floods, this might increase our costs – and could lead to higher prices. We’re very open about our customers’ claims experience, and in October 2013 we became the first UK insurer to publish our customers’ claims ratings and reviews on our website (Average 4.6 out of 5 as at 1 January 2018 for buying and claiming from us). In 2016 we paid out £2.7 billion to more than 775,000 UK customers. That's 96% of claims from our customers across motor, home, travel, protection and health insurance policies.

Insurance Premium Tax (IPT) increase

Every price includes a contribution towards administrative and running costs, such as staff and buildings, as well as Insurance Premium Tax (IPT). In 2016 the Government announced an increase in IPT from 9.5% to 10%, so all prices rose to allow for this increase. The Government also announced within the Autumn 2016 budget a further 2% increase from 10% to 12%, which was implemented in June 2017.

Other costs

Customers can access our products in a number of different ways and the price they pay will include some costs which go towards providing the services available, such as contact centres or online support, as well as investing in future products and services.

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