No more cheap car insurance, the AA warns

According to the AA's benchmark British Insurance Premium Index the average quote for a typical comprehensive motor insurance policy has risen to £549.46, up 5.2 per cent over the three months ending June 30.

Premium prices had levelled off over the previous two quarters and, over 12 months, the average quoted premium has risen by 5.5 per cent.

Younger drivers have for the first time seen the sharpest premium rises. Those aged 23-29 have see a 6.2 per cent jump to an average of £682.62, while those aged 70 and above saw the lowest rise, up 3.8 per cent to £392.13.

The youngest drivers — aged 17 to 22 — are still quoted by far the highest premiums at an average of £1,241.81, up 4.4 per cent over the past three months.

Janet Connor, managing director of AA Insurance, said that the premium rise has been expected. She said: “Thanks to bruising competitive pressure, premiums have been falling while claims costs have continued to rise — particularly for personal injury.  

“Indeed, the number of injury claims reported has been increasing at around 10 per cent per annum since 2013.

“So insurers have been releasing their reserves to maintain their competitive edge to the point where this is no longer sustainable and we are seeing premiums beginning to rise once more.

“The days of cheap car insurance premiums are over. Price rises are inevitable.”

Ms Connor said that while she expected premiums to continue to rise steadily over the rest of 2015, the Chancellor’s 58 per cent increase in Insurance Premium Tax (from 6% to 9.5 per cent) is likely to mean a much sharper rise.

She said: “This stealth tax grab will add around £18 to the cost of a typical comprehensive car insurance policy and it has come at a time when insurers have no capacity to absorb that cost and will have to pass it on.”