Car insurance premiums continue to rise

The latest figures from the AA's benchmark British Insurance Premium Index offer little relief for car owners as the upward trend in the cost of car insurance premiums continues.

The UK average premium quoted for an annual comprehensive insurance policy rose 3.1 per cent or £22 over the past quarter, a similar rise to the previous three months. Over the year, quoted premiums have risen by £50 or 7.6 per cent, to an average of £724.28.

The Shoparound index, which better reflects the premiums paid after buyers shop around, has also risen. Buyers can now expect to shell out £486 for their annual comprehensive cover: £10 (2 per cent) more than three months ago and a rise of £39 (8.7 per cent) since this time last year.

The average quoted premium for Third Party, Fire and Theft (TPFT) cover, typically bought by young drivers, has reduced fractionally (by just 0.6 per cent to £879). Young and inexperienced drivers are finding fewer insurers prepared to quote for TPFT risks and Allianz is the latest to withdraw from this market. However, the underlying trend is still upwards with the Shoparound index recording a rise of 1.2 per cent (£7) over the past quarter to £591. This is more than £62 higher than the typical premium paid at the same time last year, a massive 11.6 per cent increase.

The AA Index has tracked industry-wide car insurance premiums for 1,000 different risks throughout the country, averaged to provide a benchmark index figure, since 1994. The Shoparound index is an average of the lowest three premiums quoted for each risk.

Simon Douglas, director of AA Insurance, says: "Despite these rises the car insurance industry continues to make an underwriting loss: for every £100 taken in premiums, more than £105 is paid in claims. Insurers are particularly concerned about increasing legal costs and personal injury claims which last year rose by 22 per cent.

But he points out that the greatest insurance losses are amongst young inexperienced drivers, particularly men. Although they pay premiums that are typically up to twice that of women of the same age they also make by far the largest claims.

"The average car accident insurance claim for a young male driver is nearly £4,500 compared with £2,700 for their female peers. For drivers aged over 30, the average claim is £1,400 for men and £1,200 for women.

"The withdrawal of another insurer from this arena suggests that companies are carefully looking at their costs."

Simon Douglas says that he is encouraged by the latest casualty figures from the Department for Transport which show that the number of people killed or seriously injured on Britain's roads continues to fall. "But sadly, young drivers are taking an increasing share of that toll: it is believed that 17 per cent of drivers are aged under 25 yet they account for nearly a third (29.1%) of casualties. The insurance premiums they pay reflect that."

He adds: "I believe that despite competitiveness of the car insurance market, all these factors mean that premiums will continue to rise."