The trouble with car insurance

Sometimes it is difficult to understand exactly what you have to do to lower the cost of your car insurance premium.

Well, in 2010, it seems like there isn't much you can do.

Between April and June this year car insurance prices rose by a staggering 14.3 per cent, according to the Confused.com/EMB Car Insurance Price Index. That has meant an annual increase of over 30 per cent.

Figures just released by the AA show the trend has continued. The annual increase, to September 2010 has now reached 39.3 per cent, meaning the average fully comprehensive car insurance policy now costs £792. This is the biggest annual increase recorded in the 16 years the AA has been monitoring car insurance premiums.

The costs of car insurance to insurers, according to their 2009 financial statements, is £122 for every £100 received - and they have passed those costs onto customers, whether they're good drivers or not.

So, what is causing the increase?

New research published this week by Moneysupermarket.com reveals that one in six motorists in the UK admit to having driven without insurance. Quite possibly, these drivers, eight per cent of whom give the reason for being uninsured as cost, would have high premiums.

Although not all of them are currently uninsured, they obviously represent a lot of lost income for insurance companies.

Third party injury claims are another major factor in causing the insurers losses. The next time you see that actor who used to be in The Bill advertising the services of a personal injury lawyer, you might want to utter a quiet curse.

Fraudulent claims are actually falling, but a new type of fraud that has increased since the recession is not being picked up by the industry. Claiming for personal injury and providing false information is simply being missed.

The increase of criminal networks staging crashes, often at roundabouts, where the driver slams on the brakes, causing the car behind to hit them, then claims on the other driver's insurance, also adds to the massive amount of insurance fraud.

Who loses out?

You might imagine that having a small car would help, but, astonishingly, three-door hatchbacks are now the second-highest type of car to insure, just ahead of convertibles - yes you heard me right – convertibles, and just behind the most expensive type, a coupe.

Young drivers, especially men, are being hardest hit. OK, statistically they are one of the biggest risks, but a male driver who is under 21 now has to pay, on average, over £2,600 for full insurance cover. The situation is not much better for females either, with all 17-20 year olds paying an average of £1,900. At the end of June 2010, the average for both sexes was £1,225, just for third party fire and theft cover.

Is there anything we can do?

Taking the Pass Plus qualification will give you some sort of discount with most insurers. You should always use a price comparison site and check as many deals as you can. I also find that haggling on the phone can often knock another five per cent off too.

Failing that, if the poor beleaguered motorist (who is also paying record prices in petrol) lives and works in the same town or is close to good transport links, he may want to consider giving up the car for good.

Find the best deal on car insurance.