The cost of motor and home insurance fell to within 1% of UK inflation, according to the latest AA survey.

The cost of motor and home insurance fell to within 1% of UK inflation, according to the latest AA British Insurance Premium Index survey.

The fall, the first in over five years, saw the average cost of comprehensive motor insurance rise by just 3.53% - adding £24.11 to the average premium. Rises of 19% and 9% in 2000 and 2001 respectively, had marked previous years.

Homeowners also benefited from reduced annual increases with buildings insurance up 2.42% on 2001 and contents cover up by just 2.25%. This rise added £3.44 to the average buildings premium and £2.57 to the average contents premium.

AA Insurance Services managing director Andrew Briscoe said: "With premium increases for the year at just 3.5%, here is something for motorists to be cheery about in 2003. We are expecting premium inflation for the coming year to be marginal.

"However, even with increased competitiveness within the market, it is unlikely that we will see premiums actually fall.

"Despite the fact that the number of claims is now lower than before, the cost of claims continues to rise, mainly due to an increase in the cost of bodywork repairs as a result of a shortage of skilled technicians for this type of work."

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