Car insurance premiums on the rise

If you think you’re paying more for your car, then you could be right. The AA British Insurance Premium Index, which has been tracking car and home insurance premiums since 1994, has revealed that car insurance premiums are now at their highest level ever and are still rising. In contrast, home insurance premiums have remained relatively stable.

In the last three months the average cost of a comprehensive car insurance policy has increased by 4.35 per cent to almost £806. This is the highest since the previous high point of £777 in January 2004. While prices for cover have fallen in the last couple of years due to competition in the sector, Norwich Union has led the way in adjusting premiums to realistic levels and other insurers are following suit. The changes in the index reflect a 6 per cent rise in the cost of car insurance claims.

Those with third party insurance will be glad to know that the rise in this type of insurance is quite small. The average premium is just shy of £1,000, as this type of insurance is usually bought by young drivers with little no claims bonus. Kevin Sinclair, managing director of AA Insurance, expects this to continue to rise: ‘Young drivers account for a quarter of all road fatalities and are five times more likely to have an accident than a driver aged 35-plus. Premiums reflect this shocking record while many insurers will no longer cover young drivers.’

Meanwhile the average quoted premium for buildings insurance rose by 1.26 per cent to just over £209, while the average quoted premium for contents insurance fell slightly to just under £148. These premiums are only marginally higher than they were in 1994. While some insurers are increasing the cost of buildings cover because of extreme weather conditions, the AA expects that any effect on premiums will be marginal though it will be the start of an upward trend.