Cheap car insurance 'at an end' as premiums rise, report warns

Cheap car insurance 'at an end' as premiums rise

Car insurance premiums are pushing sharply upwards for the first time in three years - and further price hikes are "inevitable" - a report has warned.

The days of cheap motor insurance deals are over, the AA's British Insurance Premium Index said, adding that changes unveiled in the recent Budget are expected to add an extra £18 to the cost of a typical comprehensive car insurance policy.

The average quote on offer for a driver who shops around for comprehensive cover is now £549.46, marking a £27.34 or 5.2% increase over the three months to the end of June. During the previous year, the average cost of cover had hovered around the £520 mark.

The jump marks the first time that premiums have recorded a significant quarterly increase since winter 2011, AA Insurance said.

Young drivers are bearing the brunt of the increases, with people aged between 23 and 29 years old seeing a 6.2% jump in their average premiums, to reach £682.62.

Drivers aged 70 and over saw the lowest rise over the quarter, with a 3.8% increase taking their average premium cost to £392.13.

On a regional basis, drivers in the Border and Tyne-Tees and West Country areas saw the biggest jumps in their car insurance premiums over the three months to the end of June, both seeing a 6.4% increase, while drivers in Wales were the least affected, with a 3.9% rise. In Scotland, the average cost of cover has jumped by 4.4% over the past three months.

The north west of England is the most expensive area to obtain a car insurance quote, with the average premium for someone who shops around put at £795.05. Scotland remains the cheapest area for car insurance, with the average quote at £381.87.

Premiums have been on a downward trend in recent years, in part due to a crackdown on bogus claims for injuries such as whiplash, which add around £50 to the cost of each car insurance policy bought.

Insurers have been battling to maintain their competitive edge to the point where this is no longer sustainable, and so premiums are starting to increase once more, AA Insurance said.

Last month, insurers warned that millions of customers will face higher costs for cover after a hike in taxes charged on insurance products.

Chancellor George Osborne's summer Budget revealed that insurance premium tax will be increased from 6% to 9.5% from November.

Janet Connor, managing director of AA Insurance, said: "The days of cheap car insurance premiums are over - price rises are inevitable."

She said that while she had expected premiums to continue to increase over 2015, the increase in insurance premium tax is likely to mean a much sharper rise.

Ms Connor continued: "This stealth tax grab will add around £18 to the cost of a typical car insurance policy and it has come at a time when insurers have no capacity to absorb the cost and will have to pass it on."%VIRTUAL-ArticleSidebar-motoring-guide%

The AA's "shoparound" car insurance index is based on the five cheapest quotes that someone could be offered, using a combination of quotes direct from insurers, from brokers and from price comparison sites.

Ms Connor predicted that the rising cost of cover could mean that introductory offers dry up as insurers rethink their pricing.

A separate home insurance index from the AA also found that average quotes for both buildings and contents insurance policies have risen for the first time since 2012.

The cost of standalone buildings and contents policies each increased by 1.3% on the previous quarter. The average premium for a contents policy now stands at £61.18 while for buildings it is £108.15 for someone who shops around.

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The cheapest cars to insure
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Cheap car insurance 'at an end' as premiums rise, report warns

Price new: £5,995

Dacia has made a big impact in the UK with its line of affordable motors.
The Sandero is the foundation of the brand's offering and is famed for being the UK's cheapest car.

With a group two insurance classification it's also one of the cheapest cars to insure right now.
The entry level Access model is sparsely equipped, but it has a practical interior, big boot and low running costs.

Price new: £8,060

The Seat Mii is a small city car which Auto Express praises for its spacious interior, good build quality and supple ride.

All models are in insurance group one, bar the group two Sport version.
The Mii is available in three-door or five-door styles, but both measure just 3.5 metres, making it perfect for getting around town.

Price new: £8,090

The Skoda Citigo was crowned Auto Express Best City Car 2013.

The magazine praised its low running costs and practicality as well as its grown up driving experience.
Like its Mii stable mate the Citigo has group one insurance in all apart from its top specification model, making it one of the cheapest cars to insure.

Price new: £8,265

The third of the Volkswagen's group of three city cars to make the list is the Up!

Auto Express says the Up! was 'born to rule' city streets with its small dimensions and lightweight body.
There's three versions of this fun city car; Take Up! has a group one rating as does Move Up! while the higher spec High Up! gets a group two classification.

Price new: £8,345

The Hyundai i10 is another car which can get you a cheap insurance quote thanks to a group one insurance rating across all the 1.0-litre petrol models.

Auto Express says the new 2014 i10 offers big car features in a small package. And for £8,345 you also get Hyundai's five-year warranty and roadside assistance package.

Price new: £8,995

Vauxhall has managed to squeeze one of its full sized Corsas into insurance group two.
Auto Express says the 1.0-litre ecoFlex model has the lowest insurance costs of any mainstream supermini.

The eye-catching design, solid interior and big-car features make it an appealing buy for drivers.

Price new: £9,575

The Smart car caused a bit of a stir when it first appeared thanks to its dinky dimensions and bold two-seat layout, making it very useful for driving about town and absurdly easy to park.

The Smart ForTwo is the latest incarnation, which keeps to the same formula; it still has only two seats and is one of the smallest cars on the road measuring just 2.5 metres long,
The entry level 0.8- and 1.0-litre models qualify for group two insurance.

Price new: £11,810

The Peugeot Partner Tepee 1.6 VTi is the passenger version of the Partner van and according to Auto Express easily the most spacious new car that currently qualifies for a group two insurance rating.

It's got a boxy shape that provides plenty of room and has sliding doors which make it a very practical and flexible family car.

If you're after something smaller the Peugeot Bipper Tepee, which is the smallest of Peugeot's family of Tepee MPVs, also gets a group two insurance rating.

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