Cost of car insurance reaches record high
Over the last year the cost of insuring a car has risen by a staggering 40%, bringing the average shoparound premium to £892. This is the biggest annual increase on record.
In the first three months of this year, prices also rose by 5.9% according to the latest AA British Insurance Premium Index.
Drivers aged 17-22 are facing the brunt of these increases with a typical premium of £2,431. This has gone up 64% over the last 12 months to 1 March, with young men paying substantially more than women of the same age.
According to the British Insurance Brokers' Association male drivers under the age of 21 are 10 times more likely to claim than men aged over 35.
Earlier this year the Commons Transport Select Committee identified fraudulent claims as one of the key reasons for rising premiums and a raft of measures was announced to cut costs associated with the UK's 'no-win, no-fee' claims culture. The AA says this is "piling up to £80 on every honestly-bought car insurance policy".
Graeme Trudgill, spokesperson for BIBA, also argues that insurance companies have kept prices low for too long in an attempt to win new business on comparison websites but now "the bubble has burst".
BIBA's research shows that for every £100 taken in premiums, the typical insurer now has to pay out £122 in claims.
But despite these rises, Simon Douglas, director of AA Insurance, is confident increases this year won't be as steep as new measures, including improved fraud controls and plans to control the cost of personal injury claims, begin to take effect.
There are also fears that rising prices could lead to an increase in the number of people driving without insurance but Trudgill says, "measures like the Continuous Insurance Enforcement will make this impossible for drivers. The system measures every car in the country and if there is no insurance registered with the car, warning notices and then fines will be sent out."