Car insurance premiums could rise by up to 10%


Updated on 02 February 2015 | 0 Comments

The AA says cheap car insurance policies are "unsustainable".

The cost of car insurance is creeping up again, according to the latest figures from the AA British Insurance Premium Index.

The average annual quote for a comprehensive policy went up by 0.2% over the last three months of 2014, taking the cost from £539 to £540.

This follows on from a rise of 1.2% over the previous quarter, which was the first increase in premiums recorded for three years.

Despite these faltering rises, premiums are still over 10% cheaper than the same period last year, when the average policy was £601.

However, the AA warns that though car insurance is extremely competitive the underlying trend is upward and premiums could rise by up to 10% by the end of the year.

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Cheap policies “unsustainable”

Janet Connor, managing director of AA Insurance, says she expects insures to push for increases as the rise of personal injury claims makes current premium prices “simply unsustainable”.

Laspo (Legal Aid, Sentencing and Punishment of Offenders) reforms from the Ministry of Justice were introduced to cut fraudulent and exaggerated personal injury claims.

However, the number of personal injury claims have actually gone up since the reforms came into force. In the 12 months to March 2014 there were 66,000 claims per month on average. Today it's closer to 71,000 per month.

Ms Conner suggests premium falls over the past few years have had more to do with competitive pressure than any benefit from Ministry of Justice reforms.

She adds that changes proposed by the Competition and Markets Authority regulator on competitive pricing between insurers and price comparison sites has led to additional discounting and ‘special offers’ by some insurers.

However, she says the changes could make it more difficult for motorists to find the most competitive premium as they’ll have to check different comparison sites as well as direct insurers to make sure they're getting the best deal.

Compare car insurance quotes and see if you could save

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