Car insurance premiums up by 13%Analysts point to a rise in claims as reason for price hike

21 September 2016

Insurance premium tax (IPT) is set to rise to 10% on 1 October 

Car insurance costs have risen by more than 13% over the last year, according to new research. 

Stats from analysts Consumer Intelligence suggest that car insurance premiums rose by 13.5% in the 12 months to August 2016, with the average premium costing £788, compared with £696 the previous year.

Regionally, drivers in the North West were hit hardest with a 17.3% annual increase to £1,117 a year, while London saw a 16.7% yearly rise to £1,068.

In comparison, Scotland saw the lowest cost at £562 – a 12.1% increase from the previous year.  

Find out more: best and worst car insurance - more than 30 insurers rated

More claims and insurance premium tax to blame

On a quarterly basis, average premiums rose by 3.3% nationwide, while a 5.2% increase was seen over the past six months.

Consumer Intelligence pointed to a rise in claims for the price increase, but research from Which? found that premiums could rise even when a driver wasn’t at fault for a claim. Our research showed that three insurers increased their quotes when a driver wasn’t to blame for a crash, while in a scenario where repairs were covered by another driver’s insurer, four out of twelve insurers approached raised their premium.

An increase in the insurance premium tax (IPT) from 9.5% to 10% on 1 October is also already being priced into policy costs. 

Ian Hughes, chief executive of Consumer Intelligence, said: 'The latest increase in insurance premium tax, which takes effect next month, as well as rising claims are driving the rise in premiums.

'We are seeing a real acceleration in shopping around and all customers need to ensure they are receiving the best value for money from their insurer which should be easier as providers need to make it clear what last year’s premium was when they send renewals.'

Cheap car insurance: how to find it 

Earlier this week, ratings and research agency Fitch suggested premiums wouldn't fall for the next year at least, desipte government action against phoney whiplash claims. Here are three top tips to get the cheapest price for your motor insurance. For more guidance, see our guides on finding cheap car 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. Our eMindme reminder tool will help ensure you don't miss your miss your renewal date. 

3. Haggle 

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. Our guide on haggling for better car insurance deals includes a field-tested script. 

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