It's daylight robbery as premiums shoot up

Next time you reach for your chequebook to pay your home contents insurance renewal, you might ponder the fact that burglary rates have almost halved over the last decade.

Once you're over the shock of finding out that theft rates have fallen so much, you might want to have a look on the form to see whether your premium has come down?

Over the last decade, the number of burglaries (including attempted robberies) of dwellings in England and Wales has fallen by almost 45%. However, anyone hoping for a corresponding drop in insurance premiums, will be disappointed. Over the last ten years, the AA's home contents insurance index, shows that the price of the average home contents policy has risen from £143 to £152.

This price rise is even more surprising when you consider that competition between the insurance companies increased substantially during that period.

The crime figures, which come from the Home Office's British Crime Survey (BCS) show that burglaries hit a record high in 1993 of 1,750,000. During that year almost 6.5% of homes were burgled by thieves, once, or more than once. Fast forward to 2003, which is the latest year for which figures are produced, and the burglary rate falls to 974,000. Last year just 3.4% of homes were broken into, according to the BCS's figures.

Better home security has helped reduce burglary, although crime experts say other factors are at work. The price of home electronic goods such as TVs and DVDs has fallen so much that the thieves earn little when they try to sell their ill-gotten gains. Criminals have turned instead to credit card and identity theft, or to street muggings, which continue to rise.

Given the steep fall in burglaries, one might expect a fall in the price of home contents insurance. Yet a detailed look at the trend in premiums shows a different picture. While prices dipped during the late nineties, they had risen above their 1994 levels by October 2001. Since then they have continued to rise - albeit slowly. Accord ing to Ian Crowder, spokesman for AA Home Insurance Services, premiums are affected by several factors other than burglaries, and have risen way below the rate of inflation.

"Consumers have to remember that insurance premiums reflect a number of things. Over the last decade the value of goods in most people's home has risen - laptops, stereos, and other electronic items are now much more prevalent, and payouts by insurance companies have risen accordingly. The other thing that has happened over the intervening period is that the number of houses affected by flood damage has risen significantly - with the knock on-effect to premiums," he says.

Malcolm Tarling, spokesman for the Association of British Insurers agrees. He says payouts for burglaries fell from £633m in 1994 to £437m last year but adds that over the same period payouts following fires almost doubled.

"Premiums reflect a number of things - increases in subsidence and weather damage claims have cancelled out the falls in payouts that followed a reduction in the number of burglaries. The average claim following a burglary is £1,000 - the claim that follows a big fire is substantially more than that."

One factor, according to Mr Crowder, is the fact the insurance industry underwent a radical change over the decade following 1994. He says the fact that the mortgage companies were forced to stop penalising their customers who failed to purchase their contents policies should have brought premiums down - more than they actually fell.

The other big factor is new quotation systems now used by lots of companies to calculate premiums according to the area in which the home is found. Mr Tarling says those who live in the areas where the risk of burglary or flooding is at its lowest should pay less in the future - those in high-risk areas will pay more.

"This is an area where shopping around can make a big difference," says Mr Tarling. "The AA price index show that consumers can save 30% by searching for the lowest quote, and this is always our advice," he says.