Cheap Car Insurance is Not Forever, Warns AA

Cheap car insurance was offered to most drivers as the cost of comprehensive cover dropped in the first three months of the year, according to a survey by The AA.

The average cost of cover direct from insurers at the end of March was £1,132 – down 1.1% on the cost of the same cover at the end of 2011, while the same cover cost an average £737 from a comparison site – a fall of 4.3%.

The motoring organisation keeps a price watch on car insurance offered by a range of insurers and comparison sites.

To the year ending March 31, 2012, the average cost of comprehensive car insurance rose 7.7%, which is the lowest increase since 2008.

Young male drivers aged 17 – 22 saw premiums fall by nearly 1% over the quarter , while those for young women increased by 4.8%.

Simon Douglas, director of AA Insurance, warns that the factors that drove premiums up are still lurking in the shadows.

“The industry is still having to deal with fraud as well as increasing numbers of personal injury claims, despite the number of crashes falling. Industry costs continue to rise at around 10% per year,” he said.

“I can’t see this drop in premiums being sustainable for long.  My fear is that if prices do continue to drop, we’ll see a repeat of 2009, when industry losses led to premiums suddenly rocketing up following a long period of little movement.

“We are already beginning to see the number of uninsured drivers coming down due to better police detection and the introduction of Continuous Insurance Enforcement legislation last year.

“In addition, insurers are getting smarter at dealing with and exchanging information about fraud, while the new police Insurance Fraud Enforcement Unit is making significant progress in tackling insurance fraud such as cash-for-crash scams.”

Douglas also warns the European Court of Justice ruling stops insurers calculating insurance premiums on gender.

“After December, young women can expect to see premium increases of up to 25%,” he said.

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