AA’s new premium index shows biggest motor price rise

Car insurance premiums, took their biggest ever upward jump during the last quarter of 2009 rising 7.2% to £1,000 for fully comprehensive and 8.9% for TPFT to £788 according to the latest AA British Insurance Premium Index.

The ‘Shoparound’ premium of the cheapest quotes rose even more, by more than 11%, which suggests fewer cheap deals on car insurance, the AA said.

Over the year, the average quoted premium for comprehensive car insurance rose by more than 18%, the largest annual increase since the Index started in 1994.

Cheap cover rises most

TPFT cover, typically bought by young and newly-qualified drivers, rose by 23.8% over the year .The Shoparound premium rose by 22.6% over the year for comprehensive cover and an “unprecedented” 33.4% for TPFT

For aggregator sites the average quoted premium for both comprehensive and TPFT cover rose by 12.7%, with comprehensive to £674 and TPFT to £684. Average Shoparound premium increased for comprehensive by 9.6% to £506 and for TPFT by 10.8% to £602.

These results do not include the 20% premium increase announced by Zurich earlier this month.

Personal injury claims blamed

Simon Douglas, director of AA Insurance, said: “Many insurers have been reporting significant rises in personal injury claims. Many people seem willing to pursue claims for even minor injuries, such as mild whiplash pain that in the past they wouldn’t have bothered claiming for.

“This is encouraged by personal injury claims lawyers whose marketing urges people to make claims and whose costs, as well as compensation for the claim, are met by the third party insurer. This is becoming increasingly embedded in British culture and, ultimately, feeds back to premiums.

“The cost of accident damage has also been rising steadily, despite a fall in the number of accidents on Britain’s roads. The spate of collisions during the recent wintry spells, resulting in about 30% more claims than normal, may reverse that trend over the short term, though.

“In addition, insurers are suffering increasing fraud which contributes to rising costs.

Underwriting losses

“As a result, many insurers are reporting record underwriting losses. The situation is clearly unsustainable and the inevitable result is that premiums increase, despite the extremely competitive nature of the market.”

“I believe we will continue to see premium increases over the coming year, and this is underlined by Zurich’s announcement. They may, however, level off during the third and fourth quarters as insurers’ ratios improve.”

Household premiums rise too

The AA also said the average quoted premium for an annual home buildings insurance policy rose 5.9% over the fourth quarter of 2009, to £199 and contents premium increased by 6.4%, to £113.

The cost of a combined buildings and contents policy rose 8.0% to £275.

The Shoparound buildings insurance premium rose by 5.0% to £125, contents rose by 5.2% to £65 and combined buildings and contents rose by 4.8% to £184.

Aggregator figures

For aggregator sites, average quoted premium for buildings rose by 1.1% to £161, contents fell by 14.8% to £105 and combined fell by 7.7% to £232.

Average Shoparound premium increased for buildings by 3.6% to £110, contents fell by 18.7% to £66 and combined fell by 10.4% to £159.

The AA said contents and combined premiums fell because many insurers no longer including legal expenses in their quote.

Over the year average quoted premium for buildings rose by 10.5%, contents rose by 7.7% and combined rose by 10.8%.

The Shoparound premium for buildings rose by 11.5%, contents rose by 4.4% and combined rose by 9.2%

Rises for past 18 months

The cost of buildings cover is still only 24.3% higher than when the Index was first launched in 1994 although most of that gain has happened over the past 18 months.