Car insurance premiums on the increase

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By Mark Mitchell
Know Your Money Editor

Car and home insurance premiums are set to continue to rise, consumers have been warned.

Figures suggest the cost of vehicle cover has increased by 11.5 per cent in the last three months alone, the largest rise on record, which may mean now is the perfect time to take money-saving steps.

Recent research from the AA indicated the change has been caused in part by increasing claim costs and new forms of insurance fraud.

AA president Edmund King blamed a "21st century wave" of fraudulent behaviour, such as providing false information and claiming for non-existent personal injuries, for the rise.

This is having a sizeable impact as figures from industry body the Association of British Insurers show firms uncovered £410 million worth of dishonest claims last year alone.

RSA, which owns the More Than insurance brand, has raised its rates by 13 per cent for motor policies and four per cent for home cover. It said it "continues to take action on rates as and when necessary".

Fierce competition had caused many insurers to cut premiums in recent years, but rates are now on the rise again, bringing them to what the industry regards as more normal levels.

Britain's biggest insurer, Aviva, has now spoken to inform people that prices are set to rise still further.

Aviva raises premiums

The company stated it had imposed "double-digit" rises in motor premiums over the past six months while also increasing home insurance rates.

David McMillan, head of Aviva UK general insurance, said: "It is not surprising that rates have continued to harden this year. If you look at the underlying inflation in bodily injury claims that we have had in the market for the last three or four years, in many respects it is surprising rates didn't harden sooner."

He added: "There is no sign of a let-up in this inflation, so I expect this market phenomenon to continue."

Cut the costs legally

Unfortunately, one of the main reasons premiums continue to rise is due to the potential for drivers to be dishonest to their insurance firm.

Findings from Confused.com indicated 38 per cent of UK drivers have admitted lying to get a better premium, with men the worst culprits.

Almost half - 46 per cent - of male drivers have been dishonest to their insurers.

However, there are ways in which people can bring down their premiums while staying on the right side of the law.

The first is that consumers ensure they never just accept the annual renewal quote from your insurer, as shopping around could save them money.

In addition to this, when faced with losing custom a number of insurers will take action that can often see costs lowered for the driver.

Those looking for a deal with a parent or partner who is a more experienced driver could try to add them to their policy as an additional member.

This can work in favour of some motorists, especially those who are younger.

However, naming someone as the main driver of a vehicle when they are not can prove more costly than it is worth as it is called fronting and could invalidate your insurance.

Another way for people to keep cash in their pocket is to consider cutting their mileage, people who are able to do this - perhaps through using public transport or participating in a car share scheme - could lower the cost of their policy.

Keeping a vehicle safe is another simple way to lower premiums. It may be wise to install a decent alarm and immobiliser to a car if it does not already have them and, of course, keeping a vehicle in a garage or off the road can make costs cheaper again.

People may wish to refer to our car insurance comparison page - here - to find themselves a better deal.

Important Notice
This guide is intended for general information only and is not intended as, and does not constitute, any form of advice, recommendation or endorsement by us of any particular product(s) or services and you should rely on your own further research and professional advice in relation to your specific requirements and circumstances before purchasing any products or services. Use of this guide is subject to the Terms of Use of the KnowYourMoney site.