Car insurance costs rising

Drivers have faced a 24% in rise in insurance premiums in the last two years. This increase will see the cost of the typical premium soar by £100.

Car insurance premiums took their biggest ever upward jump during the last three months of 2009.

Figures from the latest benchmark AA British Insurance Premium Index reveal that motor insurance premiums are up by an average of 19% in the last year alone, and rose by more than 7% between October and December 2009.

And insurers claim they are paying out more than they are taking in. A survey carried out by industry experts EMB, revealed that last year for every £1 the retail motor industry received in premiums, it had to pay out £1.20 in costs and claims.

Analysts warn that this is a knock-on effect from the rise in personal injury claims fuelled by no-win no-fee lawyer adverts on television and the competitive nature of online insurance. This made 2009 one of the industry's least profitable years on record.

Premiums for law-abiding drivers are also being pushed up because more people are choosing to drive uninsured. About 1.6m are believed to be driving without insurance, which leads to a 'surcharge' of £30 per policy for drivers who do pay.

Will car insurance premiums continue to rise in 2010?

Yes, but industry experts hope that the introduction of electronic insurance certificates will cut down on insurers' documentation costs and drag down premiums.

Car owners will also have to insure cars even if they are not driven on the road, which should bring more drivers within the insurance net.

Earlier this week Admiral warned drivers to expect further steep increases in car insurance premiums this year, after it imposed 12% increase in 2009. Premiums have risen 2% in the first two months of 2010, putting the industry on track for similar double-digit price rises this year.

• Calculate the maximum figure that you are prepared to and can afford to spend on your car insurance. Consider changing your excess, or level of cover if you can't meet this figure.

• Search for the cheapest insurance deals, this way you will know the current rates and can make an informed decision from your research. (Use This is Money's car insurance finder )

• Ring your current insurance provider and try telling them that you intend to leave at the end the policy. More often than not they will offer you a deal or a revised fee. Alternatively if you can prove that you can get the same service but for a smaller amount elsewhere then you may be get a price match offer.

• It may not be what you had in mind but you could always downgrade the car you own. The higher the worth of the car the more the insurance cost and its premium are going to burn a hole in your pocket.

• You can take full advantage of the Government's car scrappage scheme until the money runs out. It's still going at the moment. By trading in a qualifying old car, more than ten years old, you are entitled to £2,000 discounted off the price of a new car.

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