THE cost of third-party motor insurance has gone up by 10 per cent in the past 12 months, according to Deloitte's Quarterly Motor Insurance report.
The report shows the average cost of non-comprehensive motor insurance in August was £519, up from £473 at the same time last year.
Comprehensive insurance was found to have increased 4 per cent to £458, up from £441 in August 2006.
The figures come despite suggestions that internet comparison sites are driving down rates. While Deloitte found that more than half of new business is now from the internet and that comparison sites are taking an increasing share of internet sales, most insurers are making a concerted effort to increase rates to improve profitability. Premiums have increased in nine out the past 12 months, the first period of sustained increases since 2003.
Catherine Barton, insurance partner at Deloitte, said: "The key reason for the increase is insurers seeking to improve profitability. In the past several years, the underlying motor insurance market performance has been deteriorating, with insurers' results being buoyed by releases from their reserves. This situation is not sustainable in the long term and, combined with the impact of major events such as the 2007 floods, rates were going to have to go up. We believe premiums will continue to rise for a few months yet."
However, she added: "Insurers who increase prices too quickly may find they don't achieve the increase in premium income they wanted. Instead they may just wave goodbye to the customer."
Barton advises consumers to shop around: "In spite of increasing premiums in the market generally, customers who shop around can still find a good deal - and not necessarily through a price aggregator. Those who don't shop around are likely to have seen bigger increases."
