The cost of car insurance soared by 14% during the second quarter as insurers raised their prices in a bid to return to profit, research has indicated.
The average cost of a comprehensive motor policy rose by 14.2% 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%, 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 £400 million 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.”
Drivers aged between 41 and 55 saw the biggest price hikes as they paid to have their children added to their policies, with women in this age group seeing a 14% jump in the cost of their cover if they added a driver who was not their husband to their policy, on top of the 14.2% rise seen across the board.
On a regional basis, drivers in Manchester and Merseyside saw the largest quarterly increase of 18.2%, 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%.
July 12, 2010 (Press Association)