The Market

Motor Insurance Rates Hike

Insurer Norwich Union has increased its premiums for renewals by an average of 16% in an attempt to reduce its combined operating ratio.

Motor Premiums are at the highest ever level and still rising, according to the latest AA Insurance British Premium Index. The index indicated that the cost of comprehensive motor insurance leapt 4.23% in the last quarter for 2006 alone.

Young male drivers' premiums may rise by up to 40%

The average quoted premium for an annual comprehensive car insurance policy has now risen more than £800 for the first time.

Insurers are now following Norwich Union's lead and have increased premiums to more realistic levels given that the cost of claims is rising at about 6% per annum - and this is reflected in the index.

"We are prepared to lose volume. We have had to increase premiums because claims have increased between 6% and 10%." - Norwich Union Spokeswoman

Allianz Cornhill will raise motor rates in 2007 in a bid to improve profitability.

"We've not increased our rates as of today but expect to move rates up in 2007." - Allianz Cornhill Chief Executive

We are not going to see the damaging price inflation we have seen in the past but I do think the premiums will continue to rise. The average quoted premium for third party, fire and theft cover has risen by 4.62% compared to the previous quarter. Comprehensive cover increased by 1.24% on the previous three months.

UK's largest motor insurers, Royal Bank of Scotland Insurance (RBSI) had increased all premiums across the board by 5% on new business over the past quarter.

June 2007