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Are car insurance premiums on the rise?

Are car insurance premiums on the rise?

Category: Car insurance

Updated: 22/10/2014
First Published: 22/10/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Since the end of 2011, car insurance premiums have been on a downward slide – much to the delight of motorists. However, according to the latest AA British Insurance Premium Index, the average quote for comprehensive car insurance cover has risen, which could indicate a new upward trend.

On the way up

According to the index, rises were witnessed at both the lower end of the market and over the car insurance market as a whole.

Over the three months ending 30 September, the average of the five lowest quotes for comprehensive car insurance rose by 1.2%, which equates to around £6. This brings the lowest average car insurance quote up to around £531, which is the first rise witnessed since early 2012.

This rise was even more marked across the whole of the market, with the average comprehensive premium rising by 4.2% over the same three months. This means that the average quote in the marketplace now stands at £891.

What's causing the rise?

While this data suggests that competition remains fierce at the bottom of the market, it also clearly shows that premiums are starting to creep up, which is bound to have an impact on motorists' pockets. But why the rise?

Well, it appears that this could be the result of the failure of legislation designed to cut fraudulent claims. At the beginning of 2011, insurers started to reduce rates in anticipation of the Government's LAPSO legislation (Legal Aid, Sentencing and Punishment of Offenders). It was hoped that these measures would cut the number of fraudulent and exaggerated personal injury claims, particularly for injuries such as whiplash.

However, it now appears that these reforms have failed to make much of an impact and that the continuing drop in premiums was more the result of "competitive tension" rather than a reduction in insurer costs. As a result, explains Janet Connor, managing director of AA Insurance, car insurance premiums are "no longer economically sustainable".

Since the legislation was introduced, there have been suggestions that claims management companies and law firms have found ways to get around LAPSO. In fact, many insurers have reported that there has been a rise in the number of low-value claims involving whiplash injuries to the driver and sometimes fictitious passengers. Whiplash claims are often successful as they rely upon the claimant's testimony.

These fraudulent claims are estimated to add approximately £90 on to the typical car insurance premium.

"Insurers are getting better at detecting claims and application fraud," commented Janet Connor, "yet the number of attempts to make a deceitful buck from insurers shows no sign of falling.

"These are serious issues for the industry and it's not acceptable that the majority of honest people have to stump up to pay for the dishonesty of others."

Bearing this in mind, it's possible that a rise in car insurance premiums will become a noticeable trend in the near-future, which means you may have to brace yourself for higher premiums next time you renew your car insurance.

Keeping the costs down

While a rise in price for your car insurance cover could well be on the cards, there are still ways to keep your costs down. Shopping around is the easiest way to save money, and the big disparity between the average quote at the lower end of the market (£531) and the whole of the market (£891) shows that looking around for a better deal could well pay off.

To see if you could save some money on your car insurance, get quotes now by using our handy comparison tool.

What next?

Get car insurance quotes using our comparison tool

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.