Surveys warn of the rising cost of car insurance

Consumers have been warned of the dangers of rising car insurance premiums by two surveys out yesterday.

The average comprehensive car insurance premium quote fell by 0.7 per cent to £750 over the last three months due to temperate winter months, the AA Insurance Index revealed.

This latest fall in premiums means the average cost for comprehensive cover has fallen 3.3 per cent (£25) over the last 12 months. Third party, fire and theft premiums fell also, although a more modest 0.2 per cent.

However, the AA warned consumers that the signs are that the price cutting of the previous two years could be coming to an end, despite the recent good weather.

“While these results are, of course, good news for customers, we need to be cautious that a return to normal conditions doesn’t lead to a sudden reverse of the current trend,” said Kevin Sinclair, director of AA insurance.

Also, a large number of customers are still experiencing rises in their motor premiums, despite the recent fall in car insurance prices. This is a trend experts predicted would eventually happen as insurers look to cut costs and boost profits. With the advent of Internet insurance firms, who have lower costs, the established insurers have been feeling the pinch.

According to Sainsbury’s Bank, more than one in three motorists- around 9.23 million- saw their premiums rise when they purchased their last policy.

“Some insurers entice motorists to take out their cover by offering very competitive premiums and then increase them substantially when it is time for the customer to renew their policy – even though their circumstances have not changed,” warned Joanne Mallon, Sainsbury’s Bank car insurance manager.

She also advised motorists to keep a close eye on their premiums and not assume that a deal that was good the previous year will remain competitive. Experts also advise to shop around for the best deal, as you would for a new credit card or personal loan, when it’s policy renewal time, as apathy and laziness usually lead to automatic renewal of a policy.

But as some insurers openly raise premiums, the AA found that its “Shoparound figure – an average of the three lowest premiums on its insurance index – was virtually static over the past 12 months. And with his following on from recent premium reductions, the AA is worried about the future.

“This suggests that the heavy discounting we have seen over the past couple of years may be coming to an end and that premiums may have bottomed out,” Mr Sinclair noted, adding:” What we need to avoid at all cists is a sudden leap in premiums which has happened in the past – that would not be in the interests of either customers or the industry.”

21/4/05