Premiums set to continue rising

Whiplash, taxes and price comparison websites have been blamed for a 16.3% rise in car insurance premiums in the past 12 months.

The AA Premium Index found that premiums have risen £82 on average in the past year, with two Insurance Premium Tax rises contributing £18 of that.

Michael Lloyd, the AA’s director of insurance, said, ‘We are witnessing sustained price increases once again, which is bad news for drivers. Motor insurance is a mandatory requirement and there is absolutely no justification for further hikes in IPT in the Autumn Statement. Coupled with predictive price increases, an additional tax burden would simply add to the growing number of uninsured drivers.’

The AA also found that almost 70,000 small injury claims (of up to £25,000) were made in August, and more than 839,000 over 12 months, of which around 750,000 were for whiplash.

Michael added, ‘The whiplash epidemic has dogged the British motor insurance industry for a decade and continues to do so. Drivers are still being pressured into making claims for often minor collisions that they might have forgotten about. This is pushing up claims costs because insurers can’t prove that an injury wasn’t suffered.’

He also said price comparison websites encourage motorist to shop on price alone.

He said, ‘There’s little incentive for insurers to offer low, loss-making introductory quotes on price comparison sites, because not only do they pay a fixed introductory fee that could be a substantial portion of the premium, but there is little likelihood that such customers will remain.

‘Customers don’t necessarily recognise that a low initial premium is a first-year introductory discount, so they go elsewhere. Inevitably, this will tend to push those initial premiums up and perhaps offer greater scope for insurers to reward loyalty.’