The cost of motor insurance is accelerating - here's how to put your foot on the brakes!
Given that just about everything in life is getting more expensive right now, you won't be surprised to hear the cost of motor insurance is also accelerating.
Premiums rose nearly 6% in the past year, according to Sainsbury's Bank, from an average £483 in July 2007 to £514 this year.
If you belong to the testosterone-addled 17-24 age group, you can expect to pay around £1,250 a year (girls that age typically pay much less). A more sedate and settled 50-something will pay around £350. So there are some benefits to getting older.
If your car insurance premium is racing ahead, there is one simple way of putting the brakes on: shop around. Figures from The AA show that comparing premiums can shave on average £225 off the price of comprehensive cover, and £300 off third party fire and theft.
Win-lose situation
So why have car insurance premiums bolted? Partly, you can blame the lawyers. Or to be more precise, ambulance-chasing "no win no fee" solicitors, who are actively encouraging motor accident victims to pursue whiplash and personal injury payouts through the courts.
The cost of these claims has risen by 9.5% every year over the last decade, according to the UK Bodily Injury Awards Study. Ultimately, every driver pays for no win no fee, through higher insurance premiums.
A good chunk of this money ends up in lawyers' pockets, because they snaffle a healthy share of their client's winnings.
The cost of living
The rising cost of car repairs has also fuelled recent premium increases, as raw materials get more expensive and environmental compliance laws more onerous.
Improved car safety is another factor. New designs and materials ensure the car's frame absorbs the blow in any crash, rather than the people inside, but this also increases the number of costly write-offs. Still, I think we'll all agree that is a price worth paying.
And because more people are surviving car crashes with minor injuries, more are free to pursue personal injury claims.
Fraud is another factor. Insurers are bracing themselves for an increase in dishonest claims as people try to ease their financial woes with a dodgy motor insurance claim.
Unlicensed to kill
Uninsured drivers add around £30 to everybody's motor insurance premium, according to the Association of British Insurers, as honest drivers foot the bill for accidents caused by the one in 20 motorists recklessly driving without cover.
But there is some good news here. Police are successfully using new automatic number plate recognition technology to drive unlicensed and uninsured drivers off the road.
The number of vehicles seized almost doubled last year to 150,000, up from 78,000 in 2006, according to The Motor Insurance Bureau. This has finally reversed the rise in accident claims involving uninsured drivers, down from 36,340 in 2006 to 34,239 last year.
That should help contain premiums, as will the fact that rising oil costs mean that people are driving less, and therefore having fewer accidents, and making fewer insurance claims.
Driving down prices
So can insurers justify the recent hike in premiums or are they ripping off motorists?
Insurers actually lose money by selling motor insurance, because they pay on average £112 in claims for every £100 worth of premiums.
But don't shed too many tears. They largely recoup their losses with the profits they earn from investing those premiums.
Plus, they also enjoy a bigger mark-up on other forms of general insurance such as household insurance.
But why sell insurance at a loss at all? The answer is: price comparison sites like The Fool. In the old days, people shopping around for motor insurance only had the energy to repeat their details to two or three different insurers before boredom and ennui set in.
Now they can go online and compare the market, and this has forced insurers to slash rates to get any chance of crossing the finishing line ahead of their competitors.
But now it looks as if the lid might just blow off, as years of suppressed price increases finally come to the boil and bubble over.
You can expect to pay more for our car insurance in future, but if you keep going online to compare quotes, hopefully you won't have to pay that much more.
Compare car insurance quotes at Fool.co.uk