Co-operative Insurance Society (CIS) is set to cut its premium rates for household insurance - for the fifth year running - and offer a better deal to motor policyholders.

CIS has told its one million plus policyholders they will enjoy reductions up to four per cent on buildings and contents cover, from October 1.

In contrast, the insurer predicts average rates across the household industry are likely to rise by one per cent.

CIS's 680,000 motor policyholders are promised improvements and below average increases around six per cent.

From October, CIS will include an uninsured loss recovery service and free telephone legal advice, both provided by DAS Legal Expenses Insurance, in all levels of its motor cover.

Derek Wood, CIS motor insurance manager, said motor rates rose due to large hikes in personal injury awards.

But he claimed CIS had managed to boost business by 20% last year.

Martyn Bennett, CIS general manager, said better than expected levels of claims costs was the reason for this year's household rate cuts.

And the insurer added that its mutual status had enabled it to pass on these rate cuts to policyholders.

"As the UK's only co-operative insurer, we are committed to giving our policyholders the full benefit of the improvement in the claims experience," said Bennett.

CIS said its attractive rates have won it 50% more business since last year, much of it from low income groups.

The insurer said it is one of the few to offer low-cost, restricted cover to customers in high rated areas, who find indemnity cover too expensive.

And, it offers cash collection and instalment plans for customers without bank accounts.