Drivers look set to face a sharp rise in the cost of their car insurance after one of Britain’s largest insurers announced plans to raise premiums by an average of 16 per cent.
Norwich Union is Britain’s second largest motor insurer, covering one in seven UK motorists and Mr Machell said he hoped other insurers would follow suit.
Norwich Union spokeswoman Louise Zucchi said it was not the cost of repairs but the cost of compensation to third parties following accidents, which can run into millions of pounds, that was hitting insurers hard.
She added: ‘This is an industry issue, there has been fantastic competition from the internet and it has reached a level where it is unprofitable.
‘Premiums have been driven down to an unprofitable level and you can’t keep running a business that way. We are a market leader and we choose to do this because it’s important. The fierce competition kept premiums below the level needed to cover the cost of claims.’
Mrs Zucchi said there were a number of things insurers could do to bring premiums down, such as installing ‘black boxes’ in young motorists’ cars, that force them to pay more to drive at night when the risk of an accident is highest.