Personal Injury and Legal Claims Take Toll

Car insurance premiums are rising again. In fact, according to the AA's British Insurance Premium Index, which tracks average quoted premiums from over 90 insurers and insurance schemes for 1,000 'customers' up and down the UK, they rose faster over the second quarter of 2009 than they had for nearly a decade.

The 'average quoted premium' now stands at a little over £778, up 3.5% over the quarter (April to June) – or more than 1% per month.

The Shoparound Index – which is an average of the three lowest quotes for each 'customer' in the Index and closer to what people are most likely to pay for their cover, rose even faster, by 4.4% to £526. You can get the full breakdown of the latest AA British Insurance Premium Index.

Dramatic rises

So what's behind these dramatic rises? Simon Douglas, director of AA Insurance explains that car insurers are making heavy losses in no small part to the rising cost of dealing with accident damage; a growing number of fraudulent claims and continuing costs associated with accidents involving uninsured drivers.

But the biggest contributor to rising premiums is personal-injury claims and their associated legal costs.

"In fact, personal injury claims and legal fees have become a major issue for car insurers and are one of the main causes of increasing premiums," he says.

"Last year, the industry forked out a staggering £9.6 billion* in personal injury claims, a rise of nearly £2 billion since 2006. And 40% of every payment made for personal injury is for legal costs.

"Personal injury claim lawyers are up-front about the fact that if you make a no-win no-fee claim, their costs come from the third party's insurance company. Those add to insurance company costs and contribute to the increased premiums that affect everyone."

Cutting corners?

Douglas also warns that cheap premiums often found on comparison websites are usually achieved by cutting benefits such as windscreen cover or legal expenses and high excesses. "So it's important to make sure that you are getting what you need and you are comparing like or like when comparing policies."

AA Car Insurance uses a panel of insurers and offers the lowest quote from that panel, whether online or by telephone.

"But the policy benefits, terms and conditions are identical regardless of who the insurance company is," says DOuglas. "That way, you know exactly what you are buying and you get the cheapest premium as well – in other words, real value for money."


* Source: Association of British Insurers

Last updated: 3 September 2009