Car insurance hikes ‘could lead to debt worries’

Car insurance premium hikes could contribute towards financial troubles for some, new research has suggested.

The AA has released its British Insurance Premium Index and revealed such costs soared by more than 11 per cent in the quarter ending June 30th.

This was the greatest increase ever recorded by the report, which has been issuing quarterly car and home cover trends for the last 16 years.

According to the investigation, the average Shoparound premium for a comprehensive motor policy stood in excess of £704.

This represented a growth of 11.5 per cent in just three months, which followed the previous biggest increase that took place six months ago.

A sharp rise of 12.7 per cent was also recorded for the Shoparound average for policies that were located via price comparison sites.

Mostly affecting younger motorists, premiums for third party, fire and theft cover swelled by 15.9 per cent, while those on the cost-check index leapt by 17.1 per cent.

Edmund King, president of AA, noted such costs have escalated by an “eye-watering” amount in the past nine months.

He added: “Last year, the cost of meeting claims exceeded premium income by 22 per cent and the spiralling increases we’re seeing show that insurers are trying to fill that chasm.”

The second quarter 2010 Confused.com/EMB Car Insurance Price Index recently showed the average cost of comprehensive car cover rose by 14.2 per cent between April and June this year.

This amount calculates at an extra £74 on a normal policy and means such cover has ballooned by 31 per cent in the last 12 months.

A report carried out last year showed drivers taking measures to cut their car insurance costs in order to manage their tight budgets and debts more effectively.

By Joe Shervin