Car insurance premiums soared by nearly 20% during 2009 as the UK’s growing compensation culture pushed up insurers’ costs, research has shown.
The cost of comprehensive motor insurance jumped by a record 18.7% during the year, rising by 7.2% in the final quarter alone, to leave average premiums at just over £1,000, according to a leading car insurance company.
The group warned that premiums looked set to continue rising during the coming year as insurers struggled to cope with exhausted reserves and steep increases in claims costs.
It blamed the situation on a sharp rise in personal injury claims, with people now pursuing compensation even for minor injuries, which they would not have claimed for in the past.
It said they were being encouraged to do so by personal injury claims lawyers whose costs, as well as the compensation they gained for clients, were being met by insurers.
The group warned that the desire for compensation was becoming “increasingly embedded” in British culture and was ultimately feeding back into higher premiums.
The cost of individual claims has also been rising, despite a fall in the number of accidents on roads, and some commentators estimate that insurers’ payouts are outstripping premium income by up to 20%.
At the same time, rising fraud is costing insurers around £2 billion a year, the equivalent of £44 per household.
A spokesperson for the car insurance company, said: “As a result (of these factors) many insurers are reporting record underwriting losses.
“The situation is clearly unsustainable and the inevitable result is that premiums increase, despite the extremely competitive nature of the market.”
