Average car insurance premiums 'could rise to £700+'

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The average car insurance premium could rise to more than £700 over the next few months, a report has warned.

Comparethemarket.com says a record gap between the average and cheapest deals on the market could have been caused by a lack of competition.

This price gap – known as the savings variable – grew to £118 between June and August, with the average premium costing £697.

The company said that if current trends continued, the average premium could rise to £739. Those who shop around for deals could save around £130, but even the cheapest deals have also risen by almost £70 over the past 12 months.

The report said: "A rise in incidents such as staged car crashes, rising repair bills and insurance scams are just some of the reasons why premiums have risen as insurers look for ways to absorb increased costs."

As well as these reasons, the report also blamed the increase in Insurance Premium Tax, which was introduced over the past year, for contributing to the rise.

"The growth in the savings variable to 17 per cent, the highest difference ever recorded, suggests competition may be falling," the report said.

Dan Bass, head of motor insurance at Comparethemarket.com, said it was clear to him that insurers were "not feeling any competitive pressure to reduce their prices".

The price comparison website industry is currently the subject of an investigation by the Competition and Markets Authority.