Drivers of all ages over 21 pay record insurance and may face more, says ABI

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Drivers in nearly all age groups are paying record amounts for their car insurance and could face further increases, the Association of British Insurers (ABI) warns.

Between 2015 and 2016, all age groups except those under 21 - where the increasing use of "black box" telematics policies is keeping premiums under control - faced increases in their average premium, the ABI said.

Drivers of all ages except the under-21s now face typically paying record amounts for their cover.

People in their late 50s and late 80s have experienced the highest annual rises, at nearly £35 typically.

The average price paid for comprehensive motor insurance across all ages is £462, a rise of 8% in the last year, the ABI Motor Premium Tracker's most recent figures, covering the first quarter of 2017, have shown.

The body said further waves of increases could take place between now and the start of next year, as insurers look to reinsure against large risks, such as catastrophic personal injury claims, during this period. There will be a particular spike in reinsurance renewals around January 2018, it said.

The ABI said a decision announced by the Government in February to cut the personal injury discount rate "massively increases claims costs" and "will inevitably lead to higher premiums".

The rate helps to set compensation payouts when people suffer serious injuries, for example following a car crash.

When victims of life-changing injuries accept lump sum compensation, the rate is applied when calculating the payout, to take into account the potential returns that they could expect to receive from their money over time from investing the cash.  

The ABI also said recent increases to insurance premium tax (IPT) will also have had an impact as premiums have pushed upwards.

The ABI's director general Huw Evans said while the ABI is pleased with Government plans to reform whiplash-style personal injury compensation, "the benefits could be wiped out if they don't defuse the discount rate bombshell".

RAC Insurance director Mark Godfrey said: "The Government's string of insurance premium tax rises combined with the change to the discount rate for life-changing personal injury compensation claims have clearly already had a punitive effect on the cost of motor insurance.

"The fear is that we are just at the beginning and there is a very real prospect that prices will increase much further still."

A Ministry of Justice spokeswoman said: "We have consulted on whether there is a better or fairer framework for claimants and defendants in cases of serious personal injury. We will respond to the consultation in due course."

Here are the average motor premiums by age group, according to the ABI, with the annual increase in cash and percentage terms:

:: 18 to 20, £973 minus £24, minus 2.37% 

:: 21 to 25, £676, £0, 0.01% 

:: 26 to 30, £521, £28, 5.71% 

:: 31 to 35, £450, £23, 5.49%

:: 36 to 40, £413, £27, 7.07% 

:: 41 to 45, £373, £23, 6.69%

:: 46 to 50, £354, £18, 5.44% 

:: 51 to 55, £339, £30, 9.61% 

:: 56 to 60, £311, £34, 12.19% 

:: 61 to 65, £283, £23, 8.73% 

:: 66 to 70, £260, £14, 5.51% 

:: 71 to 75, £276, £14, 5.51% 

:: 76 to 80, £320, £23, 7.69% 

:: 81 to 85, £398, £29, 7.75% 

:: 86 to 90, £476, £33, 7.40% 

:: 91-plus, £546, £32, 6.25%