Car insurance shows no respite from fast-rising premiums as another record high is reached, is the key finding form the latest benchmark AA British
Insurance Premium Index
According to the AA, over the past quarter, motorists absorbed an increase of 11.5 per cent according to the Shoparound index, which is an average of the cheapest three quotes for each ‘customer' in the Index basket of 2,800 risks.
But over the 12 months ending 30th September the Shoparound cost of an annual comprehensive car insurance policy had risen by 39.3 per cent to £792, the biggest annual jump recorded by the Index.
Young drivers are being hit with the biggest premium increases. Over the past 12 months the average cost of insurance has jumped by 51 per cent for those aged between 17 and 22: after shopping around for their cover, men of this age can now expect to pay an annual premium of around £2,500 and women £1,400.
But all drivers have been affected by fast-rising premiums over the past 12 months, says the AA.
The motoring organisation says that recent years have seen intense competition encouraged by the growth of price comparison sites, which had kept premiums artificially low to the point that many
insurance companies were making large losses on
car insurance business.
The AA says that it warned five years ago that sharp premium inflation would be the result of this competition, but says recession has added to the pain.
A proliferation of personal injury claim lawyers has also led to the number of injury claims across the board sharply increase, while fraud has eaten into insurers' costs to the extent that over the past year, for every £100 taken in premiums, £123 has been paid out in claims.
"Recent road casualty statistics from the Department for Transport* show that a third of men who are killed or seriously injured on Britain's roads are under 25, while the number of young passengers who die in car crashes exceeded the number young drivers killed for the first time in six years,” said Simon Douglas, director of AA Insurance.
“Indeed, car crashes are by far the biggest threat to life amongst young people - considerably more than drugs or knife crime, for instance.
"These are shocking statistics that underline why insurance premiums for young drivers are soaring. Multi-million pound injury claims are no longer unusual.
"It's vital that the insurance industry, road safety organisations and the government work together to stem this terrible toll on young lives.
“Premium increases will continue through into 2011. Although the quarterly increases are a little less than the previous quarter, the annual increase was the largest since the AA Index started in 1994, I expect premium inflation to be less severe in future.
“Despite high initial premiums the most effective way to reduce them is through claim-free driving, which after just one year will bring premiums down by up to a third. That's a powerful financial incentive to drive responsibly.
“However, those who attempt to drive without insurance or use fraudulent means to obtain a cheaper premium, such as fronting, are very likely to be caught. And punished”
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