The private motor market is continuing to show signs of recovery, with two surveys showing further rate increases.

But there were warnings that rates must increase significantly if the market is to make a profit.

Deloitte said motor rates increased by an average of 1.4% in July and August. This follows a 2.1% increase in the second quarter.

In the past year the cost of third party motor insurance has risen by 10%, while comprehensive cover has risen by 4%, according to Deloitte’s quarterly Motor Insurance Report.

Meanwhile, Experian said comprehensive premiums for broker business had increased by 6.2% in the third quarter of 2007. Direct comprehensive premiums increased by 0.8%.

Experian also reported that comprehensive insurance premiums had risen by 7.2%, since the third quarter 2006 for direct business and 6% for broker business.

Catherine Barton, insurance partner at Deloitte, said the rate increases indicated the early stages of the market’s recovery. But she warned that rate increases could still slip if competition intensified.

In the first quarter of 2007, rates fell by 0.3%, which Barton suggested could be the result of competition from aggregator sites.

But she remained upbeat. “There is good reason to believe that this is a turn in the market. We believe premiums will continue to rise for a few months yet.”

Rates needed to increase by 10% if the market is to achieve profitability, said Barton.