The average cost of car insurance has surged by £100 in just 12 months, research by the AA has revealed.
According to the study, the average cost of a comprehensive policy was £520.06 at the end of 2014 but was a whopping £625.70 at the end of last year.
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Why have car insurance prices risen so sharply?
The average premium increased by 10% – from £566.65 to £625.70 – in the last three of months of 2015 alone. The AA blames this on the government’s decision to raise the rate of Insurance Premium Tax (IPT).
Motor insurance premiums were previously taxed at 6% but the levy jumped to 9.5% in November. The move was announced as part of last year’s Summer Budget by Chancellor George Osborne.
Michael Lloyd, director of AA Insurance, said the 10% increase could have been as small as 7% without the IPT hike. He added: ‘We expect premiums to continue to rise through 2016 but not at the exceptional rate recorded over the last quarter of 2015.’
Following the IPT increase, the government announced new measures to tackle fraudulent whiplash claims in the Autumn Statement in November. It is hoped that the changes will cut the cost of car insurance by £50.
Find out more: discover how customers have rated their providers for car insurance claims satisfaction
Cheap car insurance: how to find it
Follow our three top tips to get the cheapest price for your motor insurance:
1. Start with a comparison site
Use a comparison site to find several quotes quickly and easily. Remember to check the details of the policies you are interested in to make sure they cover everything you need.
2. Avoid auto-renewal
Insurers reserve the best deals for new customers, rather than existing customers who are auto-renewing. Never allow your policy to roll into another year without shopping around for a lower premium.
Even if you want to stay with your current provider, getting quotes from competitors can be a great way of scoring a better deal. Once you’ve found a cheaper rate you can use this as a platform to haggle.