The cost of insuring your car has risen by more than 5% in three months, bringing to an abrupt end a fall in the price of premiums.
And there is more bad news for motorists, with the chancellor’s recently-announced increase in premium tax signalling further price hikes ahead.
The AA’s British Insurance Premium Index had shown prices levelling off during the last quarter of 2015 and the first quarter of this year, but the average typical comprehensive motor insurance policy quote rose 5.2%, to £549.46, during the three months to the end of June.
“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 annum since 2013,” says AA Insurance managing director Janet Connor.
“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.”
Referring to the government’s announcement of a rise in insurance premium tax (IPT) from November, she adds: “This stealth tax grab will add about £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.
“I also fear that those on the lowest incomes may consider driving without cover, undoing the good work carried out to bring down the number of uninsured drivers. If that happens, it will also put more upward pressure on premiums.”
Matt Oliver, of Gocompare, says the premium increases highlight the need to shop around for the best deal.
“For the last couple of years, car insurance premium indices have reported that premiums have been falling,” he says.
“This may have lulled some drivers into a false sense that they’d benefit from lower premiums if they just sat tight with their existing insurer.
“News that premiums are generally increasing and the forthcoming rise in the rate of IPT are a double whammy for motorists, and should provide a wake-up call to complacent drivers.
“When their insurance renewal notice drops through their letterbox, they shouldn’t let their policy automatically renew without first comparing quotes from other companies.”
The AA index is based on the cheapest five quotes for each “customer” in a nationwide basket of risks, using a combination of quotes from insurers, brokers and price-comparison sites.