Car insurance premiums are rising at their fastest rate in a decade, according to a survey by the AA British Insurance Premium Index.
Premiums have risen by 11% over the past year and 3.5% in the last three months. Between April and June, the average quote for an annual comprehensive car insurance policy rose to £778.13.
The sharp increase is believed to be a result of the number of uninsured motorists on the roads, with an estimated 1.6 million people in the UK currently driving without car insurance. Drivers who do pay for insurance are facing on average an increase of £30 per policy, as insurance companies transfer the rising costs to their policy holders.
Personal injury claims are also on the rise, which has also contributed to the rise in premiums. Whiplash claims and fraudulent claims – such as the ‘crash for cash’ scam – are said to be amongst the most common types of vehicle-related compensation claims at present.
The economic recession has been blamed in both instances, with drivers neglecting to renew their car insurance in order to save money, and fraudsters attempting to claim compensation through dishonest claims.
AA Insurance director Simon Douglas said: “Although the number of accidents on Britain’s roads is thankfully falling, the cost of claims continues to rise – particularly personal injury claims and legal expenses.
“During the current downturn, fraudulent claims are also putting pressure on premiums and I’m concerned this is leading to an increase in the number of people who drive without insurance.”
Penalties are being reconsidered to deter motorists from driving without car insurance. From 2011, drivers could face a £100 fixed penalty fine and see their cars crushed if they are found to be uninsured. It will also be an offence to simply keep an uninsured car, even if it is not being driven.
Meanwhile insurance companies and police are working to identify fraudulent claims and prosecute fraudsters.
Regardless however, Mr Douglas warned that he could not “see the pressure of premiums easing,” suggesting that premiums could continue to rise considerably in the future.