Avoid the 40% rise in car insurance - quick!

Car insurance premiums have jumped dramatically over the last year... here's how to fight back.

Drivers do like to moan about being a persecuted species, but on the issue of car insurance it’s difficult to argue at the moment.

According to the AA’s latest insurance premium index, drivers have been hit pretty spectacularly by rising premiums over the past twelve months. The research found that over the past quarter motorists had to swallow an increase of 11.5% in car insurance premiums. As if that wasn’t bad enough, over the past 12 months the index shows the cost of an annual comprehensive car insurance policy has rocketed by just shy of 40%, to an average of £792.

That's the largest ever jump recorded!

What on earth is going on?

The curse of young drivers

It should come as no surprise that the worst hit with premium rises have been young drivers. Indeed, for drivers aged between 17 and 22, car insurance premiums have actually risen by 51%. As a result, a young man of this age can expect to pay an annual premium of £2,500, and women £1,400.

Sadly, there is a very simple reason for such mammoth premiums – young drivers are the ones most likely to be involved in a serious accident. Figures from the Department for Transport, published in September, showed that a third of men who are killed or seriously injured on our roads are aged under 25.

And it’s not that much better for female drivers – of the 2,477 female drivers killed in accidents in 2009, 579 (or just under a quarter) were aged under 25.

Indeed, the situation is so bad that the Association of British Insurers has called on the Government to introduce a minimum one-year learning period for young drivers, in the hope that the protracted process will make them drive more safely when they do pass.

The more likely you are to be in an accident, the more likely the insurer will have to pay out on a claim, so it’s no surprise that premiums for younger drivers are so high.

We all have to pay

Such stats go some way towards explaining why younger drivers face such large premiums, but not for those of us a little older, and, statistically anyway, safer.

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So why is the cost of our car insurance on the rise too?

According to the AA there are a number of factors behind the rises. One reason has been the growth in personal injury claim lawyers (you know the ones, with the awful adverts on stations like ITV12 featuring a bloke who used to be in the Bill) which has led to a jump in the number of injury claims. Fraud has also been a problem, with fraudulent claims totalling £410m made in 2009.

However, the final reason the AA blames for escalating premiums is... well, us. Companies like lovemoney.com. The firm reckons that because of the proliferation of sites offering a price comparison service over the past few years, insurers have slashed their prices in order to beat the competition to the point that they were making losses on car insurance business. As a result, they can no longer afford to do so, and so premiums rise.

It’s not an argument that I quite buy into, I must admit. But maybe I'm biased - what do you think? (Please share your thoughts using the comments box below.)

Keeping premiums as low as possible

It’s one thing to know the reason that the premiums are rising (or at least, to know the excuse the insurers are using), but that doesn’t necessarily help you keep your premiums as low as possible. Thankfully there are things you can do to keep your car insurance premium to a minimum.

#1 Get qualified

One way to keep your premium as low as possible, particularly for young drivers who have just passed their test, is to go the extra mile with additional driving qualifications. Pass Plus for example claims that by taking their test (which covers things like driving at night and motorways) can shave up to 30% off your premiums.

#2 Don’t be a boy racer!

Growing up in Essex, I have seen more than my fair share of ropey car modifications, from those horrendous blue lights under the car itself, to ugly spoilers and alloy wheels.

And while that might impress the girls in Southend, it will do nothing for your bank balance, as car modifications will add to your premiums. Indeed in some cases tinkering with your car may actually void the policy altogether!

#3 Choose the right car

Premiums can vary quite substantially depending on what model of car you go for. This can be for all sorts of reasons, from the age of the model, to how cheap the replacement parts are.

Have a read of The cheapest cars to insure for more on how much you can save by being smart with your car choice.

#4 Choose the right premium!

Obviously it’s a good idea to shop around for the cheapest deal using the marvellous lovemoney.com quote engine.

Recent question on this topic

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    MikeGG1 answered "You will have to check your policy for the precise wording. It may be that 2 are allowed in a..."
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However, what is just as important is working out exactly what type of premium you need. Comprehensive cover is all well and good, but if your car is getting on a bit isn’t really worth much it can work out smarter to go for third party cover, which will only cover your liabilities to others.

Be sure to have a gander at Choose the right car insurance policy for a full run-down on what the different policy types offer.

#5 Change your excess

A very simple way to bring down the cost of your premium is to increase your excess. This is how much you have to pay when you make a claim. The higher the voluntary excess you pay, the less you're likely to have to pay for your car insurance premium, so it can be worth it.

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Compare car insurance quotes with lovemoney.com