Car and home premiums soaring: AA

AA research shows car and home insurance premiums show little signs of reducing.

The latest AA British Insurance Premium Index shows the average Shoparound premium for an annual comprehensive car insurance policy is now £892, a rise of more than 40% over the 12 months to March 2011.

This is the biggest annual increase ever recorded by the index, which has been tracking the quarterly movement of car and home insurance premiums since 1994.

Over the first quarter of 2011 – a period when premiums usually show little movement – the typical Shoparound premium for a comprehensive car insurance policy rose by 5.9%.

However, AA Insurance believes that increases over the rest of 2011 will be smaller.

Premiums for home insurance have also risen to their highest ever levels. The Shoparound premium for Buildings cover went up by 14% over the 12 months to the end of March to £147, with the cost of a contents policy rising by 12% to £76. The home contents premium annual premium increase was 11.9%, not 5.5%.

The index analyses quotes from more than 50 insurance companies, brokers and schemes against a basket of risks that is typical of the UK driving population. The Shoparound premium is an average of the cheapest three quotes for each ‘customer’.

Director of AA insurance Simon Douglas 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.

“This is leading to more people withholding information when taking out a policy or exaggerating personal injury claims to try to reduce their costs. But this simply piles on costs for insurers and results in yet higher premiums for honest motorists."

The main drivers of premium inflation remain fraud and injury claims, Douglas said.