Car insurance premiums dip, says AA

Motor premiums are down, but not for long

Car insurance premiums have dipped slightly in the past few months, the AA motoring organisation has said.

It said the average premium for an annual, comprehensive policy fell by just £2 to an average of £921, in the third quarter of this year.

The AA warned this was not the start of a new downward trend, and said premiums might start rising again next year.

The cost of home insurance for both buildings and contents continued to rise.

The AA said a typical buildings policy had gone up by 14% in the year to the end of September, to £152 a year, while the cost of a typical home contents policy was now £77 a year, up by 6% in the past 12 months.

Short respite

The motor insurance industry has been under considerable pressure over its premiums with the revelation this year of a widespread industry practice involving so-called referral fees.

Under this set-up, claimants' personal details are sold by insurers and others in the motor trade to no-win, no-fee lawyers.

This has increased the volume of claims, which has helped drive up the cost of premiums.

Last month, the government said it would ban the payment of referral fees for personal injury claims in England and Wales, a move welcomed by the insurance industry.

The AA said the average cost of an annual comprehensive premium had more than doubled since October 2004, from £456 to £921, with the sharpest rise coming in the past couple of years.

Simon Douglas of the AA said: "The past two years have seen the biggest-ever rises in premiums as insurers struggled to close a widening gap between premium income and claims costs."

"I believe that this [recent] fall is a respite rather than the start of a trend.

"Premiums are likely to continue rising next year, but at a much more modest rate," he added.

The Office of Fair Trading (OFT) is investigating whether the steep rise in motor premiums reflects a lack of competition among insurers.

The preliminary findings are likely to be published this December.