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Average cost of car insurance rises by more than £100

Tax increases and fraud push up the price of premiums

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The cost of the average car insurance policy has increased by more than £100 in the past year, according to latest industry figures.

Average cost of cover up by 20%

AA’s British Insurance Premium Index (BIPI), revealed that the average cost of a comprehensive policy rose by 20% between December 2014 and December 2015, from £520.06 to £625.70.

The cost of comprehensive cover rose by 10% (£59) in the last three months of 2015, marking the biggest increase in insurance prices since 2010.

Tax and fraud contribute to higher prices

Much of the increase in premiums can be attributed to change in insurance premium tax, which increased from 6% to 9.5% of every premium.

Insurance fraud could be another contributing factor, according to the AA. The report revealed that fraudulent personal injury and whiplash claims reached £835 million last year, adding a further £50 to every driver’s insurance policy.

The government announced a crackdown on whiplash claims in last year’s Autumn Statement, banning payouts for minor personal injury claims. However, these changes could still be months away, meaning drivers should act now to avoid paying too much for their insurance in 2016.

Cutting insurance costs

Rod Jones, insurance expert at uSwitch, said: “Due to the recent price rises, drivers may notice an increase in their premium when it comes to renewal time. Rather than accepting this renewal quote, many drivers can save by shopping around to see if another provider can offer a better price.

“Some drivers may even be able to save outside of the renewal window by cancelling their current policy and switching to a new provider, but it’s important to consider any cancellation fees charged by the current insurer.”

Drivers may also be able to reduce their insurance costs by paying upfront instead of monthly, opting for a higher excess fee, or choosing a black box (telematics) policy.

See if you could save by comparing insurance quotes with uSwitch:

  • Paul Reader

    Do you just make up these numbers? The increase in IPT based on the average premium of £520 is close to £17 not £50. You need to buy a calculator and stop writing rubbish!

    • Kasey Cassells

      Hi Paul, sorry for the mistake in the article. This has now been removed.

  • Mark Fryer

    That’s the problem with this site their numbers a way out. I had the same issue with energy quotation saying they could save me xxx£ year if I switched, problem is they don’t tell you that the saving is based on standard rates. Chances are u are on a better rate to start with so may be no saving at all; be carefull and crunch the numbers!