Car insurance premiums have hit their highest recorded levels ever and rose at more than five times the rate of inflation during 2016, according to the Association of British Insurers.
Increases to insurance premium tax, increased repair costs and the rising costs of whiplash claims all conspired to send the average comprehensive policy to £462 in the last quarter.
The ABI’s motor premium tracker, which measures the prices consumers actually pay for their motor cover, showed that in the fourth quarter of 2016 policies rose by 4.9% or £22 on the average premium.
The ABI said the average premium over the whole of 2016 was now 9.3% higher than it was the year before.
The new figures come amid concern that the Ministry of Justice could be about to pile more pressure on motor premiums through a cut in the discount rate – a mechanism used by the courts to adjust large compensation payments.
Rob Cummings, assistant director and head of motor and liability at the ABI, said: “These continue to be tough times for honest motorists. They are bearing the brunt of a cocktail of rising costs associated with increasing whiplash-style claims, rising repair bills and a higher rate of insurance premium tax.
“While we support the government’s further reforms to tackle lower-value whiplash costs, it must not give with one hand and take away with the other. The sudden decision to review the discount rate has the potential to turn a drama into a crisis, with a significant cut throwing fuel on the fire in terms of premiums.”
The ABI said since the budget in July 2015 there had been three separate increases to insurance premium tax, which meant that the tax would have doubled from 6% to 12% when the latest rise came into effect on 1 June this year.
Meanwhile, the average repair bill following a crash rose by nearly 32% in the past three years to £1,678. This was due to increasingly complex vehicle technology and the rising cost of spare parts due to currency fluctuations.[Source:- Gurdian]