Drivers told to expect insurance price hikesFirst-quarter premiums up for first time in years

29 April 2009

Car insurance premiums look set to rise

Car insurance premiums look set to rise

The average cost of car insurance went up by almost 11% in 2008, the AA said, and drivers are being warned to expect similar increases this year.

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According to new figures, the average cost of a year’s comprehensive cover rose by 1.3% in the first three months of 2009, to £751.60.

The AA’s Shoparound index, which compares the three most competitive car insurance quotes available, also rose by nearly 1% to an average of £504.38.

Insurance premiums

It is the first time there has been a first-quarter rise in the average cost of car insurance in six years, the AA said.

Simon Douglas, director of AA Insurance, said: ‘Although 1.3% may not sound much, premiums fell during the same period in each of the past five years, so this increase is a significant indication that insurers are determined to address past underwriting losses this year, as we predicted last year.

'Premiums tend to fall a little during the first three months of the year. It’s when most car insurance renewals take place while the new March car registration change prompts customers to look for new insurance cover, so competition between insurers tends to hold premiums in check.'

Increasing costs

But the AA said theft, fraud, personal injury claims and legal expenses were all contributing to increasing costs for insurance companies at a time when investment incoming was falling.

The group added that for every £100 insurers receive in premiums, around £105 is paid out in claims.

‘Over the past 12 months, the average quoted premium for comprehensive insurance rose by nearly 11%,’ Douglas said. ‘I expect premiums to increase by at least a similar percentage over the rest of 2009.’


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