Homeowners and motorists have seen their insurance premiums plateau over the last year, according to the AA's latest British Insurance Premium Index.
The average price of cover has risen by a mere 4.55% this year. While this is good news for consumers, the AA said the insurance industry may face turbulent times.
Meanwhile, buildings and contents premiums have risen only marginally. Average contents insurance premium has risen by just 0.59%.
AA Insurance Services managing director Andrew Briscoe said: "Following a four year period of near relentless premium increases driven by rising claims costs many insurance companies have started to return to profitability. This recovery, in turn, has resulted in the stabilisation of insurance premiums.
"The stable market is now attracting new entrants into insurance, who are using price promises and loss leaders to obtain customers. While this is good news for consumers in the short-term, if could threaten long-term stability of the industry.
"Insurance companies rely heavily on investments in the stock market to fund their business. With the current economic climate it is not surprising to see some insurance companies having to raise extra funds.
"If, as all the indicators show, a price war is imminent, inevitably, some insurers will struggle to survive. The result will be another period of consolidation or even the collapse of some underwriters.
"While consumers may be enjoying the prospect of lower prices today, the industry is in for another bumpy ride."
