Car Insurance Prices in the UK

Over the past one year, insurance prices across the UK have risen to an unprecedented high. On average, a 40% increase in car insurance premiums was recorded in the country, with the highest rise recorded in the last quarter of the year. Between September and December 2010 alone, rates rose by a minimum of 11% across all categories of drivers. It is expected that the prices will keep soaring throughout 2011 as there are no signs of a reduction in the near future.

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Insurers say the rise was prompted by the alarming number of claims filed by motorists month after month. Most insurance companies spend over 20% of total premiums paid to settle claims. This without including cost of operation and other charges that come with running a business, including salaries for employees. Add up all these expenses and all the profit made is nearly swallowed up. Increasing premiums is therefore the only option they have left to mitigate loss.

Fraud is another factor that has greatly contributed to the increase in premiums. A good percentage of motorists say they have staged an accident in the past just to get a settlement, and would not hesitate to do it again. Another form of fraud common among policy holders is omission of and lying about important details. If a situation in their past or present is likely to cost them more in premiums, many people prefer to omit or change the information in their quote form. For as long as insurance companies have no way of knowing the truth, they continue paying less than they should. This group of drivers is more likely to be involved in accidents than any other, putting other drivers at risk too.

Exaggerating personal injuries suffered in an accident to get more in compensation is another common form of fraud. As injuries are best felt by the sufferer, it is hard to decipher the real impact an accident has had. This group fakes illnesses whose severity the doctor has no way of determining, often those involving pain.

In the rising insurance prices, the most affected group of drivers is young drivers between ages 17 and 22. They are now paying up to 65% more in premiums, which comes to around £2,430 on average. This simply pushes car insurance beyond the reach of many in this age bracket, yet it is the group considered most dangerous on the roads. The cost of third party, fire and theft insurance has risen by at least 82% to average £21,532. Now, this type of coverage is popular among new drivers who are also in the high risk category of drivers. With such a huge increment, it is probable that many new drivers will hesitate before buying their first insurance policy.

Comprehensive coverage rose by 22%, easily going beyond £1,000 a year. This is a record for this type of coverage, which normally averages around £600. Even third party insurance, the very basic form of insurance, has gone up by a minimum of 7.5%. This goes to explain why many motorists are driving uninsured cars. At the last count, the number of uninsured vehicles frequently driven on public roads was 20%. If the rates do not come down, this number is likely to increase. For most people, buying insurance no longer makes any economic sense, especially those who own older cars. “Why spend more than £1,500 a year on a car that is worth £1,000 or less?” seems to be the reasoning here.

The only way to make some savings off insurance costs is by comparing prices across insurance service providers. Thorough comparison can save you upwards of £300, which is a substantial amount of money when stashed in an investment or savings plan.