The rising cost of car insurance is a stealth tax on motoring for millions of drivers trapped in an ever-increasing spiral of paying more for less cover.
In recent weeks, drivers have sat powerless as annual premiums for car insurance have surged by an average £4 a week over the past year and consumer watchdogs have snapped at the biggest names in the business for allegedly fixing prices.
In the last three months of 2010, insurance premiums climbed further out of the reach of motorists by 6.4% – adding a massive £51 a year to the typical cost of comprehensive car insurance.
Comprehensive car insurance started 2010 at an average cost of £633 or £52.75 a month – and ended the year at £843 or the equivalent of £70 a month.
Prices are set to rise still higher in 2011, with industry insiders predicting increases across the board of 20%. If that becomes true, motorists will have to pay yet another £168 a year and will see the typical cost of comprehensive car insurance break through the £1,000 ceiling to £1,011 per year.
Many drivers will be asking where all the money is going, because motorists do not seem to be gaining any extra benefits or better service after handing over their hard-earned cash that would be better spent on day-to-day living costs for their families.
Law traps motorists in to paying spiralling car insurance
The insurance price watch figures come from the AA, who say although comprehensive premiums have risen for everyone, young drivers have suffered the brunt of the increases: 17-22 year olds have seen premiums rise by 15.1% (more than 5% per month) and by 58.3% over the year, to £2,251.
Third party, fire and theft (TPFT) insurance, most commonly bought by young drivers for old cars, is being offered by fewer and fewer companies and can be more costly than comprehensive cover, rising by 26.6% over the quarter, and 71.9% over the year, to £1,390.
Simon Douglas, director of AA Insurance, said: “There has been no let-up in premium increases as insurers struggle against losses from 2009, when for every £100 taken in premiums, £123 was being paid out in claims. This has led to the biggest annual premium increases we have seen since the AA Index began in 1994.”
According to the Association of British Insurers, 108 fraudulent motor insurance claims amounting to a combined value of £1.12 million are detected every day – putting the cost of fraud at £80 for every honestly bought car insurance policy.
The car insurance system is deeply flawed.
Drivers must buy cover to keep their vehicles on the road – yet private companies are wringing profits out of honest drivers to balance the claims made by those who are dishonest.
Insurance companies blur the costs of cover by shrouding policy details in marketing hype and have been criticised by swapping data to align prices.
Perhaps the government should introduce basic car cover that all insurers must market without any bells and whistles, so drivers can compare prices and opt for cheap car insurance that keeps them legal and on the road. If other drivers then want to up their cover by buying extra benefits, then they can choose to pay extra.