The private motor market's efforts to return to profit-ability suffered a blow this week with figures showing rates had begun to soften in the first quarter of 2007.

According to the AA British Insurance Premium Index, the average quoted premium for an annual comprehensive policy fell marginally to £802. This was £4 less than the all time high price of £806, quoted in the last quarter of 2006, according to the AA.

Motor premiums increased by 4.35% at the end of 2006 as motor insurers attempted to increase rates to keep up with claims inflation, and return the private motor market to profit. It has not made a profit since 1994.

Kevin Sinclair, managing director of AA Insurance, said: "Some distributors, especially online providers, are taking advantage of the rising trend to offer big introductory discounts and that has checked premium averages.

"But there is a limit to how long they can hold back the tide."

Sinclair predicted that further rate hikes would occur by the end of 2007.

Meanwhile, buildings cover showed a second quarterly increase of 1%, while contents cover rose by just under 1% – in contrast with a slight fall over the last three months.