Why car insurance premiums are hitting record levels in 2011

May 10, 2011

insurance

With inflation increasingly on the economic agenda in recent months, few will be surprised to learn that the cost of many services has gone up over the last year. But did you know that car insurance premiums have gone up by at least 15 per cent since 2010? Industry figures show that the average car insurance premium today costs £1,000, a 19 per cent increase on 2010. How is it that car insurance costs are continuing to rise when so many drivers are attempting to cut down on their premiums in light of the on-going economic downturn?

One of the biggest contributing factors has been many drivers not providing accurate information when seeking car insurance quotes on the internet or over the phone. They may underestimate the number of miles they drive in a year or what they use their car for, making it very difficult for insurers to accurately judge the amount of risk involved in insuring them. If they do have an accident, insurers are either forced to pay out more than anticipated, or may refuse to pay out at all, meaning that the driver will be expected to pick up some of the tab in increased premiums the following year.

Leading insurance industry figures have also pointed an accusing figure at “no win, no fee” lawyers who are increasingly seeking damages on behalf of clients injured in a car accident through no fault of their own. Sometimes disparagingly known as “ambulance chasers”, these lawyers can expect to be paid substantial fees if victorious and are believed to be responsible for up to 200 injury damages claims every day. Many have been accused of using unscrupulous tactics such as encouraging clients to claims for injuries that are hard to disprove, such as whiplash, and making claims based on accidents that happened several years previously.

This also ties in with an increased number of fraudulent car insurance claims where people make damages claims for injuries that were not actually sustained. In many cases, all claimants need to do is supply a doctor’s note and the insurance company will be unable to disprove their claim. In response to increased fraudulent claims and litigation, the insurance industry has called on the British Government to place restrictions on “no win, no fee” lawyers.

The bad news is that insurance costs look set to rise again for many drivers in the coming years. A new European Court of Justice ruling means that insurers can no longer differentiate based on gender, meaning that young women, who traditionally have paid lower premiums than their male counterparts, can expect to pay up to an extra third on their car insurance from the end of 2012. Young male drivers, on the other hand, can look forward to seeing car insurance quotes drop by up to 10%.

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