The average cost of car insurance in the United Kingdom has topped £1,000 for the first time. The AA says the steep rise is partly down to an increase in the number of settlements in personal injury cases.
Year-on-year, the average fully comprehensive quote rose 18.7%, the biggest annual leap since the AA began keeping records in 1994. That includes a 7.2% rise in the past three months alone, fuelled by an increase in accidents caused by the bad weather.
AA car insurance director Simon Douglas said the yearly rise was exacerbated by two factors. Firstly, there has been an increase in legal claims for injuries such as whiplash which people were less likely to follow-up in the past. Secondly, insurance fraud is still a problem, adding around £44 to the average premium.
The average premium for third party, fire and theft is actually £252 more a year than fully comprehensive. That may not make sense at first glance but is explained by the fact that the option is more likely to be taken up by younger drivers who pay more for insurance and would otherwise be paying an even higher rate for fully comprehensive.
The figures are put together by looking at the three lowest quotes on the market for particular types of customer. Research shows that the actual policies taken out by customers are usually from among the three cheapest quotes.
Surprisingly quotes on comparison sites rose quicker than the overall average in 2009. That appears to be because insurers are concluding that offering heavily discounted first-year quotes to hook new customers has failed to pay off as people are willing to shop around again the next year rather than pay the firm's "standard" rate.
That's not to say shopping around doesn't pay off. One source estimates that sticking with an existing insurer from year to year works out on average to be £141 more expensive than the cheapest option from a rival firm.