Car insurance premiums still rising - AA

Car insurance premiums jumped by a further 6.4% in the last three months of 2010, the AA’s British Insurance Premium Index has revealed.

This added £51 to the cost of an annual comprehensive car insurance policy.

The rises are less than the previous quarter, leading the AA to believe that it marks the beginning of a slow-down in price rises.

Over 2010, the average Shoparound premium rose by a £210 (33.2%), from £633 in January 2010.

Third party, fire and theft (TPFT) insurance is being offered by fewer insurers, the AA said. The cost of TPFT rose by 26.6% over the quarter, and 71.9% over the year, to £1,390.

Although comprehensive premiums have risen across all ages, young drivers have suffered most: 17-22 year olds have seen premiums rise by 15.1% (more than 5% per month) and by 58.3% over the year, to £2,251.

Simon Douglas, director of AA Insurance, says: “There has been no let-up in premium increases as insurers struggle against losses from 2009, when for every £100 taken in premiums, £123 was being paid out in claims.

"This has led to the biggest annual premium increases we have seen since the AA Index began in 1994.”

The sharp rises recorded by the Index prompted a House of Commons Transport Committee inquiry into the car insurance market.

“I hope that as a result of the inquiry, the Government is able to help the motor insurance industry stem haemorrhaging costs. Swiftly introducing the Jackson reform of rogue accident management firms and increasing police resources to help tackle insurance fraud would be welcomed,” said Douglas.

On 11 January, Mike Penning MP, Under-Secretary of State, Department for Transport, told the Inquiry that from 1 April 2011, continuous insurance enforcement (CIE) would become law, while insurers should be given access to the DVLA database as part of the insurance application process, later this year.

“Both measures are very welcome. They will help insurers start to get a grip on costs,” said Douglas.

CIE legislation will make it an offence to keep any vehicle that is either not insured or is subject to a Statutory Off Road Notice (SORN).