Big hikes in cost of car insurance
- Fraud pushes up premiums
- Up to 17% more expensive
- Price comparison sites hit hard
Fraud is pushing up the cost of car insurance at its fastest-ever rate, according to the AA.
Premiums have rocketed by more than 11% in the previous quarter ending June 30 – the biggest increase since the AA British Insurance Premium Index began tracking car and home insurance trends in 1994.
Research revealed that during the past three months the average premium for comprehensive car insurance exceeded £704 – a rise of 11.5% in just three months.
The amount paid for such policies purchased through price comparison websites increased at an even sharper rate, with a 12% rise in premiums for the same period.
Price comparison sites easier to 'manipulate'
Edmund King, the AA's president, believes price comparison sites have experienced bigger increases because they make fraud easier to commit.
He said: 'It's now much easier to get an insurance quote online. For example, comparison sites can enable dishonest individuals to manipulate information to get a lower premium. Insurers are increasingly charging higher prices to these people to cover the increased fraud risk.
'This quarter's record increase comes on top of previous record rises. For those shopping on comparison sites, average premiums have climbed by an eye-watering 32.8% – or £193 – in just nine months. Even those taking the cheapest prices have typically seen them rise by £98.'
Young drivers hit hardest
Premiums for third party, fire and theft cover, often bought by young drivers, climbed by 17.1% on price comparison sites.
Simon Douglas, director of AA Insurance, believes this type of insurance will become increasingly rare, which could result in many young drivers deciding not to insure their vehicles.
He said: 'More and more insurers are withdrawing this type of cover because it is unprofitable. In a few years it could well disappear altogether.
'Under-21-year-olds looking for cover on a price comparison site will find that fewer than half of the companies listed will offer such a quote.'
In 2009, the cost of meeting insurance claims exceeded income from premiums by 22%, which has resulted in the sharp increase in cost to consumers as providers try to fill the void left on their balance sheets.
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