Car insurance premiums driven up by uninsured drivers

01 August 2008 / by Rachael Stiles
Drivers could soon see more increases in the cost of car insurance, Admiral has warned, driving up the cost of motoring, with uninsured drivers being partly responsible.

The car insurance industry has already seen average rises of five to six per cent recently, with Admiral saying that their own premiums rose by three per cent in the first six months of 2008 compared to the same period in 2007.

The insurer – which owns the car insurance price comparison site elephant.co.uk and Diamond car insurance – has warned that the increasing cost of insuring a car is likely to result in premiums rising at a faster rate than claims for the first time in seven years.

Admiral chief operating officer, David Stevens, is confident that the group will withstand a recession if or when one comes, because there will always be demand for car insurance.

"A car for most people is a necessity, not a luxury, so demand is not going to fall off a cliff as it will in other sectors," he said.

Meanwhile, comparison site comparethemarket.com believes that price hikes are due, in part, to uninsured drivers pushing up premiums by costing each driver an extra £31 a year on average.

In total, uninsured motorists cost law-abiding insured drivers £500million a year, a survey by the comparison site found, an injustice which 87 per cent of drivers believe the government is not doing enough to prevent, calling for tougher penalties on those who do not insure their cars.

Curerntly, UK drivers believe illegal motorists are not given sufficient deterrents to breaking the law, the research found. The average fine is just £250 for driving without car insurance, which 79 per cent of respondents think is not sufficient.

Almost 70 per cent of motorists who have been involved in an accident with an uninsured driver have had to incur costs, either paying for damage caused by the incident themselves, or suffering increases in their premiums of the loss of a no claims bonus as a result. The survey found that more than one in ten drivers have been involved in an incident with an uninsured driver.

There is some concern in the industry that the recent rises in the cost of car insurance is acting as an incentive for drivers to dodge car insurance if they cannot afford it.

Jeremy Moll, head of insurance at comparethemarket.com said: "At present motor policies are hit by the knock on effect of uninsured drivers and the financial implications they create; so any steps to deter uninsured drivers would be a move in the right direction."

Theresa Villiers, Shadow Secretary of State for Transport responded to calls for action to the government, saying that uninsured drivers are "adding money on to every law-abiding driver’s insurance premium at a time when the cost of living is increasing sharply", adding that "It is high time the Government took decisive action on this problem."

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