Car insurance premiums contributing to UK inflation

According to the Office for National Statistics (ONS) car insurance premiums have risen by 6.3% during April 2010. ONS also established that this has directly added to the record breaking inflation the UK is experiencing at the moment. Of all the monitored price categories, excluding petrol, car insurance premiums are escalating the fastest. The annual inflation rate increased by 0.1% to 3.7%, partly as a result of the rise in car insurance premiums.

Car insurance premiums are currently increasing by approximately 26.1% per annum, making affordable car insurance policies harder to attain. According to the Association of British Insurers (ABI) rising legal costs are "the main driver behind the trend in rising motor premiums". The ABI added that "this is not about how much insurers pay out in compensation to claimants - indeed, insurers want to pay compensation to claimants more quickly than the current system - but about spiralling legal costs."

Government reports have indicated that personal injury claims valued at less than £10,000 will cost insurers an additional 76p for every £1 paid in compensation. These additional costs add roughly 10% to vehicle owners' insurance premiums.

Fortunately for motorists, car insurance premiums have remained fairly stable over the past few years, mostly due to the highly competitive nature of the market. An increase in the number of injury related claims has also put car insurance providers under additional pressure.

Reports by the Department for Transport suggest that the number of road traffic accidents is decreasing. This creates a scenario where car insurance premiums should become cheaper, but with £5.2 million worth of fraudulent claims submitted per year, this is not the case. Fraudulent claims directly increase car insurance premiums by £44 each year. Given that one in five people would still consider submitting a fraudulent car insurance claim, any significant reduction in premiums appears unlikely.

About Prudential Insurance

Prudential is a UK provider of car insurance. Their motor insurance policies offer comprehensive protection or protection against fire, theft and third party claims. Visit http://www.pru.co.uk/insurance_protection/car_insurance/ for more information or a free, no obligation, car insurance quote.