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Car insurance premiums see record rise

Wednesday 19 July 2017, By Autovolo

Car insurance premiums see record rise

Car insurance premiums see record rise

Car insurance premiums have increased by 11 per cent over the past 12 months, which is about four times more than inflation.

Figures released by the Association of British Insurers (ABI) show that the average premium has increased by £48 to £484 compared with last year. This is the fastest year-on-year rise it has ever recorded.

It said that the fast increase had been driven by the Government cutting the personal injury Discount Rate – which is used to guide compensation pay-outs for serious injuries – from 2.5 per cent to minus 0.75 per cent in February.

Also affecting the cost of premiums is the increase in Insurance Premium Tax, which went up from 10 per cent to 12 per cent on June 1.

Huw Evans, director general of the ABI, said: “This dramatic increase drives home how important it is the Government press ahead with a new framework for the Discount Rate and call a stop to further hikes in Insurance Premium Tax.

“The UK is one of the most competitive motor insurance markets in the world, but the unprecedented increase in claims costs is driving up prices to record levels.

“Most younger and older drivers are likely to face increases even higher than this, hurting people who can least afford it. Worryingly these increases are unlikely to be the end of the road if reinsurance premiums go up at the end of the year, adding further costs to insurers.”

Mark Godfrey, RAC insurance director, says the Government should discuss lower insurance tax for anyone willing to use a ‘black box’ telematics device.

He said: “These figures should be a wakeup call to the Government that, without action, premiums risk spiralling out of control.”