The home cover that's going through the roof

Customers of HSBC and First Direct are facing a sharp rise in the cost of their buildings insurance policy this year, which could in some cases add hundreds of pounds to their annual bill.

HSBC said this week it is sending out renewal notices which contain an average premium increase of 23%, in contrast to rivals who have kept rates down.

The Association of British Insurers says most buildings insurance premiums have remained "fairly flat" over the past year - and in some cases they have actually fallen.

HSBC's policies are underwritten by Royal & SunAlliance, which says it has had to start upping its premiums for HSBC customers following the introduction of a new system to calculate premiums.

The issue came to light last week when I rang First Direct, the telephone and internet bank which is directly owned by HSBC, with a view to adding home contents to my buildings policy.

I have held a buildings-only policy with First Direct for at least the past five years to cover our small, three-bedroomed flat in the Herne Hill area of south-east London.

I was somewhat surprised to be told that my buildings insurance premium, which was renewed in May, had gone up from £648 to £844 a year - a rise of just under 30%.

I tried to get it reduced - we had tenants in the property until last month, when my family moved back in - and I asked them to include contents cover as well. But their final quote, £775, was still too high.

However, with a little shopping around I was able to find some much cheaper offers. For example, Tesco quoted just £544 for the same level of cover - a saving of £231. Tesco also offered a lower excess.

A spokeswoman for First Direct said the premium increases are due to the fact that its insurance premiums are now calculated differently.

"Our insurer Royal & SunAlliance has recently introduced a new system that better calculates the risk according to the home's postcode," the spokeswoman said.

"In some ways we are ahead of the other companies in this area, in that we expect premiums across the industry to rise. Overall we expect the average HSBC insurance customer's buildings policy to rise by 23%."

Despite the price increases, she was keen to stress that HSBC will continue to offer cover to everyone, rather than only quoting for those customers offering the lowest risk - a system adopted by some other insurers.

She also admitted that HSBC was looking at changing the way it offers insurance to its customers, particularly in the light of recent price increases.

A spokeswoman for Royal& SunAlliance says the big increases are mostly limited to HSBC customers. "Other Royal customers may see some increases but certainly not of the same order," she says.

Buildings insurance is set to become a big issue for lots of UK householders. Next month, Norwich Union and the Environment Agency will make their flood maps of the UK fully available to the public for the first time.

The maps will show in new detail which properties are most at risk of flooding.

Insuresupermarket.com, an insurance price comparison website, is urging homeowners in flood risk areas to shop around now for the best deal on home insurance - ahead of any changes insurance companies make as a result of seeing which addresses are at most risk of flooding.

Richard Mason, director of insuresupermarket.com says: "This type of flood map means that for the first time premiums can be based on the flood-risk to an individual property rather than postcode area.

"Some unfortunate people will be deemed high risk and will potentially have to pay massive premiums.

"Our advice to anyone who lives in a flood risk area, but who has not already been affected by flooding, is to shop around now and get the best deal you possibly can well in advance.

"This way, come September, even if it transpires that you are considered high risk, you will at least have cheap insurance for the next year and your insurer will still be obliged to continue to cover you."