Car insurance premiums are rising at their fastest rate in a decade, according to an AA report.

According to the latest benchmark AA British Insurance Premium Index, car insurance premiums rose by 3.5% in the second quarter of 2009, and 11% over the past year. The average premium for comprehensive car insurance increased by 3.5% between April and June this year to an average £778.13, while premiums for Third Party, Fire and Theft, typically bought by young and inexperienced drivers, went up by 4.6% over the quarter to £968.22.

The AA said theft, fraud, personal injury claims and legal expenses have all contributed to the rise in premiums, with personal injury claims expected to hit £10.9bn by 2012.

Simon Douglas, director of AA Insurance, added that some customers were being fooled into buying policies that offered cheap premiums, but inadequate cover.

“The fact remains that underlying premiums are rising more steeply than they have since 2000 because of rising costs,” he said.

“There’s no getting away from the fact that the industry continues to suffer underwriting losses, which are predicted to be in excess of £240 million this year. Customers are being tempted by cheaper quotes that offer lower levels of cover with high excesses so it is really important that they talk to their insurer to make sure that the cover meets their needs before they buy.”

The Index also suggests that young drivers are shouldering a greater share of premium increases, as a growing number of insurers are withdrawing third party cover options, and only half of insurers will offer quotes to under-21s.

Douglas continued: “I don’t see the pressure on premiums easing. Over the past three months more than 90% of quotes in the AA Index added £5 or more to their premiums and only 2% fell. During the previous quarter, 20% had reduced their premiums”.

This entry was posted on Thursday, July 30th, 2009 at 2:31 pm and is filed under Car Insurance, Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.