AA: Car premiums continue upward trend

11 October 2006 / by None
According to the AA's British Insurance Premium Index, car insurance premiums have risen for the second quarter in succession.

The average quoted premium for comprehensive cover over the course of a year rose by 1.24 per cent on the second quarter of 2006, the survey shows, while a much larger increase was found with third party, fire and theft insurance (4.62 per cent).

The findings contradict the falling headline rates advertised by many insurers, although many are now publicly stating that an increase in cost was inevitable due to the increasing costs of meeting claims.

"The increase is long overdue," said Kevin Sinclair, managing director of AA Insurance.

"Premiums have been kept artificially low by the entry of new insurers seeking market share and the growth of internet sales, coupled with underlying poor results hitting insurer's accounts."

Mr Sinclair said that one of the UK's largest insurers, Norwich Union, had responded to the rising costs by raising its rates and that this would likely spark a chain-reaction across the industry.

"Some companies will still hold back premiums for short-term gain but I expect other companies to follow Norwich Union's lead. Two quarters' rises may not be a trend but I believe average quoted premiums will continue to go up."

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