Cost of car insurance rises sharply

22/10/2009

Car insurance premiums are increasing, putting a heavier burden on the household finances of UK motorists.

New figures from AA Insurance, released today (October 22nd), show that the average quoted deal has risen in cost by 5.6 per cent over the last three months - the sharpest three-month rise since the firm began taking records in 1994.

The new increase also means that the cost of car insurance is now 14 per cent higher than it was 12 months ago.

Commenting on the figures, AA Insurance director Simon Douglas said that premiums could rise still higher in future as firms struggle to return to profitability.

Insurers are currently thought to be paying £110 out in claims for every £100 taken in premiums.

"Despite motor insurance being one of the most competitive markets in the UK, insurers have little choice but to put premiums up," Mr Douglas added.

"Car insurers are facing fast rising costs, reserves for paying claims are depleted and investment income has fallen, largely because of the recession.

AA Insurance also released home insurance figures today, showing that premiums for home buildings insurance and home contents cover had risen by 1.6 and 1.8 per cent respectively.

"The average quoted premium for an annual comprehensive car insurance policy now stands at over £821, compared to £778 in July 2009 and £721 in October 2008," Kevin Still, EuroDebt director, added.

"For many households running one or two vehicles this is yet another increase in their annual expenditure, with little respite on any front. Policy holders seem to be paying the costs of rising personal injury claims, fraud, theft and uninsured drivers. The news on third party fire and theft policies is not much better, with many insurers withdrawing this type of cover, especially to younger drivers.

"For people in financial difficulty these increases need to be budgeted for and prioritised because it is a legal requirement to have car insurance. EuroDebt would always look at properly budgeting for car expenditure in a Debt Management Plan, especially if the vehicle is required for work and to sustain household income."

Tags; Advice on Travel Costs, Young Family Finances, Retirement Money Problems, Credit Card Lifestyle, Recent Graduate Debt,

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