Rise in car insurance another blow to motorists

The average cost of a comprehensive motor policy rose by 14.2 per cent during the three months to the end of June to 599 – a 74 increase, according to price comparison website Confused.com.

The latest rise leaves a comprehensive policy costing 31 per cent, or 142, more than it did in July 2009.

The group said insurers were imposing double digit price hikes in a bid to get back into profit, following increased claims costs, including higher personal injury payouts, and rising fraud.

Business consultants EMB, which produces the index with Confused.com, said figures from the Financial Services Authority showed the average car insurer incurred costs of 122 for every 100 of premiums they received in 2009.

The industry also had to pay out 400m to the Motor Insurance Bureau last year to cover the cost of accidents involving uninsured drivers, adding an average of 30 to the price of policies for other motorists.

Simon Lamble, product director at Confused.com, said: "This is a massive blow for motorists who have already suffered at the hands of petrol price hikes and insurance premium tax increases, and unfortunately we do not think we've seen the worst of it.

"In the last two years visibility of the market through price comparison sites has kept prices down and driven up competition.

"In order to secure customers, insurers have been forced to repeatedly slash their margins, but inevitably this could not continue."

On a regional basis, drivers in Manchester and Merseyside saw the largest quarterly increase of 18.2 per cent, following one of the lowest rises in the first quarter, while, on a postcode level, drivers in Bradford, East London and Ilford faced the biggest price hikes of 20 per cent.