Cost of motor policies up by more than one-third last year

The average price of a comprehensive car insurance policy soared by nearly 40% last year, according to the latest Confused.com/EMB Car Insurance Price Index.

The 38.2% increase in the level of the average premium for 2010 represents a tripling of the 12.6% rise recorded in 2009.

The quarterly snapshot also shows that third party, fire and theft policies increased by 56.3%, equal to an extra £322 on each policy, compared to 21.6% in 2009.

But the 6.9% rise in the cost of comprehensive cover in the quarter between October and December 2010 continued the slowing of price rises seen in the previous quarter (8.6%). The index shows that consumers now pay an average of £695 for annual comprehensive cover, an increase of £45 in the past three months and £192 during 2010. The average third party premium is £893.

The biggest annual increases in both the quarter and the year were experienced by 51-55 year olds (43%) , reflecting the tightening of underwriting when adding children as secondary drivers. For the first time in 18 months, quarterly increases for comprehensive insured and spouse policies were higher than those for insured only. Nevertheless, insured and spouse has been comfortably the least harshly treated type of insurance for consumers over 2010 with increases of 28.7%.

Manchester/Merseyside experienced the largest regional quarterly and annual increase for comprehensive policies, going up 11% this quarter and 49% in 2010. Other regions with annual increases of more than 45% were Inner London and Leeds/Sheffield. Inner London has the highest average premium at £1,061. By contrast, Central Scotland has had the lowest or second lowest rate of increase in four of the last five quarters.

At postcode level, Bradford, Bolton and East London have had the biggest annual rates of increase for comprehensive cover. Drivers in Kirkwall, Reading and Motherwell were at the other end of the scale.

EMB partner Peter Lee said: “Insurers have been carefully managing a juggling act between the need to address underlying profitability and maintaining competitive prices which explains the trends we have seen particularly in the second half of the year,”

“We will have to see what effect this has had when the corporate results for insurance providers in 2010 are available. Of course the beginning of 2011 has presented a new factor with the increase in IPT. Longer-term, the Government Transport Select Committee’s inquiry into the cost of car insurance may influence certain market dynamics.”

Confused.com head of motoring Will Thomas said: “Increases in car insurance costs on the scale witnessed in the past 12 months are likely to be a factor in putting many household budgets under pressure. The effect of them, plus the recent 1% increase in IPT and rising fuel costs can only emphasise the need for value in purchasing decisions.”