Motorists are bearing the brunt of premium rises while household insurance costs have remained flat, according to the AA's quarterly British Insurance Premium Index.
The index shows motorists are paying £507 on average for comprehensive cover – a £28 increase over the last three months and a full £68 since last January.
However, the cheapest premium in the survey works out at £325 – 36% cheaper than the average – although this, too, has risen by £20 over the last quarter.
Kerry Richardson, AA insurance managing director, said several factors were causing the above inflation premium increases. These include: fewer underwriters competing for business due to mergers among the biggest insurers, claims inflation – which means insurers are paying £1.15 for every £1 they receive in premiums; new NHS charges for road accident victims; and IPT which has jumped from 2.5% in 1995 to five per cent now.
Richardson explained: "Insurance companies have been operating at a loss in the last few years – paying out more in claims than they take in premiums – and they are now putting prices up at a rate of two per cent a month to recoup these losses."
The AA recommends a number of ways policyholders can keep premiums low.
Discounts can be earned from shopping around, especially on the internet which offers significant savings, and for driving fewer than 6,000 miles a year. Most importantly, it advises using a good broker who will check the market for competitive quotes.
Householders, meanwhile, are facing an increase of only 55p in their buildings insurance and 51p in their contents cover since last October. This leaves contents insurance costing an average of £104 and buildings cover around £129.
But policyholders renewing their annual policy are likely to inherit larger rises of £4.50 in combined buildings and contents policies.
