Rising energy prices: how do they affect my insurance premium?

Rising energy prices might not affect the amount of insurance premiums directly, but they do contribute to inflation and help drive up the ABEX index. This index tracks changes in construction prices. Explanations.

Rising energy prices are disrupting many areas of the economy by significantly reducing profit margins in many sectors and pushing up prices.

At first sight, the increased cost of energy such as gas or electricity does not appear to have any impact on the home insurance industry. But, producing building materials involves the consumption of a considerable amount of energy. As a result, tensions in the energy market are driving up the price of building materials. 

Prices of steel, wood and insulation materials are increasing, as is the financial burden of interventions by insurance companies in case of a claim. So, premiums are rising accordingly.

The importance of the ABEX index for the insurance industry

Home insurance pays out so you can repair or rebuild your property if it is damaged or destroyed. The ABEX index of theBelgian Association of Surveyors tracks building costs, including labour costs.Updated twice a year, insurers use it as a basis for assessing how much to payout for property claims.

Interpretation of the ABEX index by insurers

The price of building materials and labour alone is not enough to estimate precisely the cost of a claim for an insurance company. Local specifics also have to be factored in. 

For example: in a given region, planning rules insist on natural slate roofs. This means that the cost to the insurance company will be different than with tiles.

In short, the insurance market may be less volatile than the energy market, but it is not insensible to increase in the price of energy resources. If the price per barrel soars, that’s bad news for the amount of your premium.