AA reports rise in car premiums

Car premiums rose by 1.3% in the first three months of this year, the AA has reported.

The average quoted premium, based on data from 1,000 customers representing more than 80 insurance providers, rose by 1.3% to £751.60, the AA British Premium Index showed.

Simon Douglas, director of AA Insurance, said: “Although 1.3% may not sound much, premiums fell during the same period in each of the past five years, so this increase is a significant indication that insurers are determined to address past underwriting losses this year, as we predicted last year.”

The Shoparound index, an average of the lowest three premiums for each customer, rose by just under 1% to £504.38.

“Premiums tend to fall a little during the first three months of the year. It’s when most car insurance renewals take place, so competition between insurers tends to hold premiums in check.

“But the industry is facing escalating costs, falling investment income and underwriting losses. Premium rises are therefore inevitable,” Douglas said. He expects an increase over the rest of 2009 of at least 11%, the average quoted premium for comprehensive insurance over the past year.

Fraud, personal injury claims and legal expenses are all increasing costs, the AA said. Last week the ABI announced a 30% increase in fraud, which adds around £40 to every premium paid.