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Car insurance premiums soar by 20%

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A recent study has blamed 'compensation culture' for a near 20% rise in car insurance premiums during 2009.

According to the AA, the annual comprehensive car insurance premium soared by a record 18.7% during the year, leaving the average cost at just over £1,000.

It also highlighted that the average comprehensive car insurance cover jumped by 7.2% in the fourth quarter of the year.

The AA also estimates that premiums will continue to surge during the coming year as insurers struggle to cope with exhausted reserves and soaring claims costs.

The group said that there was a dramatic rise in personal injury claims and attributed it to lawyers' advice to claim even for minor injuries.

Although there has been a decline in the overall number of road accidents, the cost of individual claims has been increasing.

Some commentators have also estimated that insurers' payouts are outstripping premium income by up to 20%.

Additionally, a rise in fraudulent claims is costing insurers around £2 billion a year

Simon Douglas, director of AA Insurance, said: "The situation is clearly unsustainable and the inevitable result is that premiums increase, despite the extremely competitive nature of the market."

© Press Association 2009