Average comprehensive car insurance premiums reached their highest level in four years as they soared to £633.06 in the last quarter of 2016, insurer AA has revealed.
From October to December, the average car insurance premium jumped by nearly £35 or 5.8%, according to AA’s latest premium index. The rate is rising five times faster than train fare hikes – it increased by £66 or 11.7% over the whole of 2016.
Michael Lloyd, the AA’s director of insurance, said that several factors are influencing car premiums.
“Uninsured driving is rising; partly I believe because the increases in Insurance Premium Tax, and fraud – particularly whiplash claims – continues to dog the industry,” he said.
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According to AA, detected insurance fraud costs the insurance industry £1.3 billion. The number of injury claims – mostly whiplash – has risen by 90% over the last 15 years and adds around £40 to the average car insurance premium.
“Insurance is based on claims experience,” Lloyd said. “It’s also extremely competitive and I have little doubt that if the number and cost of claims falls, then the cost of an annual insurance policy will also fall.”
The insurer said accidental damage claims inflation is also adding around £25 per year to the average quoted price.
“The cost of accidental damage is rising fast – and I believe it’s becoming a much bigger threat to motor policy price inflation than whiplash,” said David Brown, insurance partner at KPMG UK.
“I expect that when new figures come out over the next few months, there may be more bad news with costlier accidental damage repairs which may well lead to premiums suffering further upward hikes,” he added.
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