Premium rises for car and buildings insurance

by Gill Montia

Story link: Premium rises for car and buildings insurance

The AA’s quarterly British Insurance Premium Index shows a marked rise in car insurance costs in the three months to the end of June.

During the period, the average premium quote rose by £20 for comprehensive insurance, taking the average cost of such cover to £700.

For young drivers, who typically buy third party, fire and theft insurance, more than £45 has been added to the average premium quote, bringing the price of the average policy to £884.

According to Simon Douglas, director of AA Insurance, the number of casualties on Britain’s roads is falling but the cost of accidents is rising and young drivers are taking an increasing share of the toll.

Mr Douglas expects the upward trend to continue because of rising legal costs and personal injury claims.

In addition, insurers need to restore their balance sheets after claims for last summer’s flooding plundered their reserves.

In recent years, motor insurance has been subsidised by some companies which have used their reserves to offset premium rises and keep their share of a highly competitive market.

Analysts at Citigroup have predicted that the level of reserve releases for such purposes is not sustainable in the long-term.

The AA’s Index also found that the average home insurance quote rose by £1 (0.5%) during the second quarter of the year.

However, the Shoparound Index, which provides an average of the lowest three premiums for each area covered in the main index, shows a 22% rise in buildings insurance since July 2007.