Car insurance premiums soar by 40%
Car insurance premiums have soared by a record 40% during the past year as high levels of fraud and personal injury claims continue to push up the cost of cover, research shows.
The average cost of a comprehensive policy, based on the three most competitive quotes available, reached £892 at the end of March, 40.1% more than a year earlier and the biggest annual rise recorded by the AA since it started the index in 1994.
Younger drivers continued to bear the brunt of the increases, with the cost of comprehensive cover for motorists aged between 17 and 22 jumping by 64% to average £2,431, rising to £3,052 for young men.
The biggest hike was to third party, fire and theft cover, policies that are often taken out by young drivers who cannot afford comprehensive cover, with premiums soaring by 82.1% to £1,533 as insurers continued to exit the sector, reducing competition.
The AA said the main factors pushing up the cost of motor insurance continued to be high levels of fraud and expensive personal injury claims.
The group said despite the number of collisions on UK roads falling, the number of claims for whiplash injuries continued to rise, with more than 200 claims submitted a day, often for accidents that happened up to three years ago, when no mention of injuries was made at the time.
But it added that recent proposals by Lord Chancellor Kenneth Clarke to curb the costs associated with "no-win, no-fee" claims should help to improve the situation if they become law.
Simon Douglas, director of AA Insurance, said: "The record rises in fuel costs coupled with spiralling car insurance premiums is disappointing news and is making driving unaffordable for many, especially cash-strapped young drivers."
He added that although motor insurance premiums had risen by 5.9% during the first three months of 2011, a period during which the cost of cover is normally static, increases for the rest of the year were likely to be smaller, and price hikes for the whole of 2011 were unlikely to exceed 20%.
But the Association of British Insurers warned that unless action was taken to curb the cost of personal injury claims, motor insurance premiums would continue to rise.