The average quoted premium for an annual comprehensive car insurance policy rose by more than 1% over the first quarter of 2009, according to The AA’s latest benchmark British Insurance Premium Index.
This is the first time for several years that there has been a first-quarter increase in car insurance premiums. The average quoted premium, based on data from over 80 insurance providers on a basket of 1,000 customers, rose by 1.3% to £751.60. The Shoparound index, an average of lowest three premiums for each customer and is closer to the premium most people will pay, rose by just under 1% to £504.38.
Simon Douglas, director of AA Insurance, says: “Although 1.3% may not sound much, premiums fell during the same period in each of the past five years, so this increase is a significant indication that insurers are determined to address past underwriting losses this year, as we predicted last year.
“Premiums tend to fall a little during the first three months of the year. It’s when most car insurance renewals take place while the new March car registration change prompts customers to look for new insurance cover, so competition between insurers tends to hold premiums in check.
“But the industry is facing escalating costs, falling investment income and underwriting losses. Premium rises are therefore inevitable.” Mr Douglas pointed out that theft, fraud, personal injury claims and legal expenses were all contributing to increasing costs.
“Figures issued by The Association of British Insurers show that the value of detected fraud rose by 30% last year. Insurance cheats add an estimated extra £40 to the average premium paid by honest motorists.
“In addition, theft claims for modern expensive cars, where thieves first steal the keys by either robbery or burglary, rose by 15% over the six months to April, compared with same period last year.
“Personal injury claims and their associated legal costs also continue to rise, especially as the recession takes hold.” Mr Douglas said that for every £100 in premiums received by motor insurers, around £105 was paid out in claims. He added that the economic downturn had also contributed to reduced investment income and depleted reserves from which insurers pay claims.
“Over the past 12 months, the average quoted premium for comprehensive insurance rose by nearly 11%. I expect premiums to increase by at least a similar percentage over the rest of 2009,” he added.