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Motorists facing hikes in premiums

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A new report indicates that cash-strapped motorists may be in for more premium hikes as insurers look to cover the losses they suffered as a result of soaring claims last year.

According to estimates by accountancy firm Deloitte, car insurance providers paid out 120p on every 100p of premiums they collected last year resulting in collective losses of over £2 billion.

The rise in compensation costs, which was blamed on a surge in the number of no-win no-fee personal injury claims, came despite the 10% increase in premiums over the year.

Some of the insurers said they have had to inject millions into their cash reserves while most do not expect the situation to improve at least until 2012.

Deloitte insurance partner James Rakow believes that providers will attempt to recover some of their losses by increasing premiums further this year.

For some motorists taking out new car insurance cover, the premiums may be up to 30% higher, according to recent AA estimates.

© Press Association 2011