Insurers could be up for a vicious price war, according to the AA's latest British insurance premium index.

The index shows that car and home insurance premiums have levelled off and average price increases this year were only 4.55%.

"The stable market is now attracting new entrants into insurance, who are using price promises and loss leaders to obtain customers," said AA Insurance Services managing director Andrew Briscoe.

"While this is good news for consumers in the short term, it could threaten long-term stability of the industry."

The index suggests that car insurance premiums have continued to stabilise with the average comprehensive rates up 0.88% to £687.94.

Home insurance rates have remained stable with average buildings rates up 0.48% since July to £139.99 and 3.23% in the last 12 months.

Contents premiums marginally increased by 0.59% on the quarter to an average £112.73. This is an annual increase of 2.92%.

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