Car insurance premiums rise to an average of more than £1,000

Wednesday, 25 July 2012 12:28

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After two quarters where car insurance has not increased overall, the trend has been reversed in the second quarter of 2012, according to the latest AA insurance index.

The average car insurance premium in the UK now costs £1,034, an increase of 8.5 per cent over the past year.

The report says that some insurers are raising the cost of premiums as they try to tackle "crash for cash" and fraudulent whiplash claims.

Young drivers aged 17-22 are bearing the brunt of the increases.

Simon Douglas, director of AA Insurance, said: "We expect the industry eventually to have routine access to DVLA data and the sooner this happens the better.

"It will allow fraudulent applications to be weeded out. Insurance companies are already exchanging information about people who appear to be manipulating data in order to cut the price quoted."

Maeanwhile households could be faced with higher home insurance premiums following the recent run of bad weather that battered Britain, according to an AA survey.

The insurer’s latest index shows that the cost of annual buildings cover dipped slightly during the second quarter to June 30, but the average price, £176, is 6.9 per cent higher than the same time last year.

Contents premiums have also fallen fractionally in the last quarter, but are 4.8 per cent higher than a year ago, at around £92.

Simon Douglas, director of AA Insurance, said: “We experienced the wettest June on record and the bad weather has continued into July, resulting in flood insurance claims approaching £200 million, according to some estimates.

“While on their own these claims are unlikely to result in the kind of premium increases we saw after the 2007 floods, when the average quote for a buildings policy increased by 21.9 per cent, insurers are likely to respond by resuming the upward premium trend sooner rather than later.”

What marks the latest flooding events is that in many cases, they happened in places with little or no history of flooding, Mr Douglas said.

They have followed extreme rainfall over a relatively short period, resulting in flash floods from surface water rather than flooded river systems.

At the same time, insurers have seen a rise in other weather damage – high winds and even tornadoes tearing up trees, toppling chimneys and ripping off roof tiles.

Meanwhile, the AA index for car insurance reveals a “turbulent” market with premiums rising for policies bought direct from the insurers, but falling for those quoted on price comparison sites.

Over the second quarter to June 30, the average cost of an annual comprehensive car insurance policy rose by 4.3 per cent to £1,034 – an increase of 8.5 per cent over 12 months.

But using price comparison sites, the average premium has fallen by 0.9 per cent to £631, a drop of 3.3 per cent over the year, the AA said.

Mr Douglas said some insurers are increasing premiums while others are cutting prices to increase their customer base.

“Competitive pressure is leading some companies to make big premium cuts on price comparison sites so that they can increase their portfolio of customers,” he said.

“While this is great news for consumers, they need to make sure they’re getting good cover, not just a good price.”

 

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