Millions of people in flood-hit areas are braced for rises of up to 50 per cent in home insurance premiums, industry experts said on Friday.

Insurance companies face an expected bill of about £2.5bn following some of the worst flooding in UK history, in which at least 39,000 homes have been damaged. But analysts say the companies are likely to pass the costs on to the 5m people living in flood-prone areas.

Norwich Union, which underwrites one in five home insurance policies, disclosed this week that it would be raising home insurance prices by an average of 10 per cent.

It said all customers would see an element of increase but if customers were in a high-risk area and had been repeatedly flooded then their premiums would reflect that. However, other factors, such as the crime rate, would also be taken into account.

The British Insurance Brokers' Association (Biba) hit out against insurers for raising prices. "This is a knee-jerk reaction . . . and is somewhat opportunistic. Insurers and the insurance market have responded well to the recent floods. It is important now that insurers concentrate on the flood claims and the government commits to improving flood defences."

The Royal Bank of Scotland signalled on Friday that upward pressure on prices was likely, but so far no other provider has committed itself to price rises. Royal & Sun Alliance, the UK's second biggest general insurer, said its approach was to charge the "right premium for the right risk", using its flood-risk mapping system, which identified risk at individual household level. "The concept of blanket price increases does not flow from this approach," it said. "One bad year doesn't necessarily mean premiums need to rise the following year."

But insurance brokers remained pessimistic. "I would not be surprised to see price increases of 40 to 50 per cent in the highest risk areas as a result of this," said Peter Gerrard, the head of research at Moneysupermarket.com, the price comparison website.

Jennifer Rose at Confused.com also warned flood-hit homeowners to prepare themselves for significantly more expensive premiums because their postcodes would be re-rated as higher risk areas and they would lose their no-claims bonuses.

She said insurance claims this time were also coming from places not deemed high risk. "The claims we are seeing are not necessarily in typical areas," said Ms Rose. "Insurers may therefore widen the areas where they consider the risks to be."

James Harrison, the chief executive of Insurewide.com, agreed. "Insurers will definitely look at different areas. If they brought increases in across the board they would be at risk of losing business. The [home insurance] market is extremely competitive."

Mr Harrison believes people who live in extreme risk areas, such as those that have been flooded many times in the past five years, will be more often rebuffed by traditional insurers and will have to turn to more specialist providers. "These specialists could demand premium increases of around 50 per cent," he said.

Premium price differences between poorer and more affluent regions may also have to widen because the cost of property and content claims varies so much.

According to the Association of British Insurers, claims are averaging about £30,000 a home in Yorkshire and Humberside and £50,000 in Gloucestershire and Worcestershire, where properties tend to be larger and the value of their contents greater.

Norwich Union said the recent flooding, which will cost its parent company Aviva £340m, was only one factor in its decision to raise premiums. It blamed the action on the escalating value of claims because repairs have become more expensive.

But although the cost to insurers has risen, home insurance premiums have remained static over the past five years.

Norwich Union's decision to raise home insurance prices echoes action it took last year with car insurance. The group announced average price rises of 16 per cent for motorists. Some drivers ended up being hit by increases of 40-50 per cent.

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By Sharlene Goff, Andrea Felsted and Andrew Taylor

Copyright © 2007 The Financial Times Limited.