Car insurance shoots up

20 July 2004 / by None
Since 1994 the average cost of car insurance has almost doubled while home cover has effectively remained static, says the AA.

The new research comes as the AA's benchmark British Insurance Premium Index prepares to celebrate ten years of tracking car and home insurance premiums.

It has been a roller coaster ten years for car insurance, with the cost of comprehensive cover rising by 86 per cent.

The director of AA Insurance, Neale Phillips, said: "It's been a dramatic decade. What the next ten years will bring is hard to say, but motorists are more likely to be hit by costs such as tolls, congestion charging, fuel prices and parking than by rising insurance premiums."

Over the decade the cost of petrol has risen from 57p/litre to 80p/litre (40 per cent), and the cost of a family car has risen from £10,500 to £12,900 (23 per cent).

As for the number of cars on the UK's roads, this figure has risen from 23.8 million to 28.5 million (20 per cent).

With housing, today premiums are less than one per cent higher than in July 1994, although they fell by nearly 15 per cent to July 1996. It then took five years for rates to climb back to their July 1994 position.

The cost of contents insurance has consistently remained marginally higher than buildings although a slight increase over the current quarter does not suggest a trend.

"This really is a case of 'no news is good news'," says Mr Phillips. "Despite the dramatic rise in the cost of homes and the higher value of contents, insurance premiums have been remarkably stable. In real terms, premiums have fallen and represent good value for money."

Mr Phillips believes people have become increasingly "savvy" about shopping around and urges consumers to continue to do so.