AA index records rising car insurance premiums

Car insurance premiums, which started rising during the second quarter of 2006, show no sign of easing, according to the AA’s latest benchmark British Insurance Premium Index.

The average quoted premium for an annual comprehensive car insurance policy rose by more than 1 per cent while more than 3.5 per cent was added to the average premiun for third party, fire and theft cover.

Car premiums continuing upward, despite competition

Over the past quarter, third party, fire and theft (TPFT) car insurance took a further leap upwards reflecting concern about the growing number of claims made by young drivers, who typically buy this type of cover. An increase of 3.57 per cent took the average quoted premium to £1,042.41, its highest ever level.

The average quoted premium index for comprehensive insurance also rose, by just 1.35 per cent, to £833.56.

“The latest rises are in line with expectation,” says John Close. “Car insurance premiums have followed an upward trend since the second quarter of 2006. The cost to the industry of personal injury claims and legal costs has been escalating rapidly while accident damage costs has also risen faster than premiums. In addition, recent flood claims have cost insurers an estimated £100m.”

But despite the upward trend, the ‘Shoparound’ index (an average of the lowest three premiums on each risk quoted in the Index) fell by just over half of one percent to £462.18, underlining how competitive the motor insurance market remains.

He adds: “I’m concerned about the rising cost of TPFT insurance which reflects the tragic toll of accidents among young drivers so I support the Transport Select Committee’s proposal to increase to 18 the minimum age for holding a full driving license. The AA also believes teaching a responsible attitude towards driving should be part of the national curriculum.”

John Close points out that male drivers under the age of 21 are ten times more likely and female drivers five times more likely, to be killed or seriously injured in an accident than those over the age of 35.

Comprehensive car insurance summary

Over the second quarter of 2007, the index of average quoted premiums rose by 1.35 per cent to £833.56 (up 2.5 per cent to £822.47 over the previous quarter)

Premiums have risen by 7.96 per cent year-on-year

The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) fell by 0.54 per cent to £462.18

Third party, fire and theft insurance summary

The index of average quoted premiums rose 3.57 per cent to £1,042.41 (up by 1.32 per cent to £1,006.44 over previous quarter)

Premiums have risen by 4.43 per cent year-on-year

The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) rose by 2.47 per cent to £574.18