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Car insurance rising at record rate

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The cost of comprehensive car insurance rose at its fastest rate for 15 years in the three months to the end of September, new figures show.

Average premiums for the cover increased by 5.6% during the quarter and by 14% year-on-year to £821, the AA said, adding that it was the biggest jump since it began monitoring the market in 1994.

Rising car insurance costs have hit young drivers - who typically have third party, fire and theft insurance - the hardest. Premiums for the cover now average £1,059 - up by 9.3% during the third quarter and by 17.6% from last year.

Simon Douglas, director of AA Insurance, said: "The index suggests that 89% of insurers have increased their premiums by more than £5 over the past quarter. Only 2.5% reduced them."

The premium increases, the study found, were largely fuelled by rising cost of personal injury claims and fraud, which cost the industry £9.6 billion and £1.9 billion respectively last year.

With car insurers were currently paying out an estimated £110 in claims and costs for every £100 received in premiums, the rise is likely to continue, it added.

© Press Association 2009