According to the AA British Insurance Premium Index, the last quarter saw the biggest increase in car insurance premiums since the motoring organisation started collecting data 16 years ago, when the average annual comprehensive car policy rose by 11.5% to £704.
The AA Index is based on the average of the three cheapest premiums available to those seeking insurance renewals. According to the AA numbers, overall premium costs actually rose by 12% to around £1,000, up from less than £800 a year ago.
Young drivers were the hardest hit demography. Premiums for fire and theft, and third party cover, popular among young drivers, rose by 15.9%. The average premium for this group stood at £1,224.99. In fact, third party, fire and theft cover is now generally more expensive for most drivers than comprehensive cover, due to the high volume of claims on these products.
Experts say that rising costs from personal injury claims, many of which are false or exaggerated, are also behind the drastic rise in insurance quotes.
Edmund King, AA president said that although the latest British Crime Survey shows crime levels to be on the wane, it ignores some of the modern guises of criminal activity, such as falsifying information or claiming for bogus personal injures on car insurance policies.
Data indicates that the rise in the numbers of cases of insurance fraud coincided with the beginning with the recession. New figures to be published by Association of British Insurers (ABI) towards the end of this week will in probability show this trend to be still on the up. ABI estimates that the cases of undetected general insurance claims fraud costs the industry around £2bn each year, adding around £40 a year the premiums of all policyholders.
Another contributing factor towards the rise in premiums has been the ever rising repair costs. Insurers are facing a tough battle as they fight to recover to huge underwriting losses they have been making in a deflated economy. Estimates suggest that every £1 taken in premiums, £1.22 was incurred in claims.
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