Premiums for Car Insurance Rising at the Fastest Rate for Over a Decade.

Car Insurance Premiums Rising

Over the past three months Car insurance premiums have increased by 3½pc and 11pc over the past year, according to the AA British Insurance Premium Index.

Premiums are rising at their fastest rate for nearly a decade said the AA. It found that the average premium for comprehensive car cover rose by 3½pc to £778.13 between April and June. The average quoted premium for third party, fire and theft insurance, typically bought by young and inexperienced drivers, rose by 4.6pc over the quarter to £968.22.

Theft, fraud, personal injury claims and legal expenses are all contributing to increasing costs said the AA. Whiplash injury alone represents around £66 for every car insurance policy sold and Personal injury claims and their associated legal expenses rose are expected to hit £10.9billion by 2012.

Director of AA Insurance Simon Douglas said that price comparison websites were misleading the public by suggesting that premiums were staying static. He said: “The fact remains that underlying premiums are rising more steeply than they have since 2000 because of rising costs.

He added “There’s no getting away from the fact that the industry continues to suffer underwriting losses, which are predicted to be in excess of £240 million this year. Customers are being tempted by cheaper quotes that offer lower levels of cover with high excesses so it is really important that they talk to their insurer to make sure that the cover meets their needs before they buy.”

The trend is reinforced in the 2009 Mintel Motor Insurance report, which pointed out that large premium increases would be necessary to for underwriters and insurers to recoup profits said the AA. It also suggests that young drivers once again appear to be shouldering a greater share of premium increases. Mr Douglas said that a growing number of insurers are withdrawing third-party cover and only around half will quote for drivers aged under 21, who make 10 times more claims than drivers aged 35.

Mr Douglas concludes: “I don’t see the pressure on premiums easing. Over the past three months more than 90 per cent of quotes in the AA Index added £5 or more to their premiums and only 2 per cent fell. During the previous quarter, 20 per cent had reduced their premiums.