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Small fall in car insurance premiums

The AA have reported that there has been a small fall in the average amount of money that a car insurance policy costs for the third quarter of the year.


The average annual car insurance premium has fallen by £2 to £921 according the AA. This figure is based on the cost of an annual comprehensive policy and represents just a 0.3% drop in price. However, the AA also indicated in March this year that insurance premiums were 40% higher than in March 2010.


The AA have also suggested that the fall is unlikely to represent a change in the trend of rising prices and they have also suggested that prices are likely to start increasing again next year.


Other research from confused.com has suggested that, on average, car insurance premiums rise by 12.3% per year. The AA also confirmed that car insurance premiums were now twice the amount that they were in 2004 and the biggest increases to the premiums have come over the past few years.


Simon Douglas from the AA said: "The past two years have seen the biggest-ever rises in premiums as insurers struggled to close a widening gap between premium income and claims costs. I believe that this [recent] fall is a respite rather than the start of a trend. Premiums are likely to continue rising next year, but at a much more modest rate."


Some experts are concerned that the steep rises in insurance premiums have been made possible by a lack of competition in the insurance market. These concerns have prompted the Office of Fair Trading (OFT) to begin an investigation. The results of the investigation are due in December this year.


The motor insurance market have come under further scrutiny over the last year due to the widespread selling of referral fees. Many companies have been selling details of their customers claims to no-win, no-fee personal injury law firms.


Experts have suggested that this has contributed to the rise in insurance premiums, as more people have been convinced into making injury compensation claims. Others have also indicated that this has contributed to the rise of a "compensation culture" in the UK.


The British government have confirmed that they intend to ban the payment of referral fees.


Whilst the AA reported a slight dip in car insurance prices, Home insurance has continued to rise, and is now at its highest level.


Home contents insurance has increased by nearly 6% to £77.21 per year over the last 12 months. Buildings protection insurance has also increased by approximately 14% in the last 12 months and is now an average £152.18 per year.


Mr Douglas suggested that there has been a great deal of focus on the sharp increases to car insurance premiums, but home insurance has also been steadily increasing over the last few years. He also believes that these premiums will also continue to rise.


Experts also suggest that these rises may be compounded by the rise in inflation and strongly advise anyone to shop around to find the best possible deal available to them.




Retirement Solutions (UK) Ltd are independent financial advisers that specialise in financial products for the over 50s. Visit the web site at www.retirementsolutions.co.uk

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