Cost of car insurance falls to record low in the UK

The cost of car insurance has fallen to record lows in the UK, in a development that comes as a welcome relief to cash-strapped drivers, new figures showed.

The average quote for annual comprehensive car insurance is down to £594.86 – a 9.8 per cent drop from the figure of £659.53 in July last year, according to AA Insurance.

This marks the steepest drop after the AA insurance index started in 1994.

The fall comes largely due to fraud prevention measures as also new restrictions on claims management companies, it said. However, despite the fall, premiums remained appreciably higher than their levels six years ago.

While all age groups had seen costs fall, those aged 23-29 had seen the maximum decreases with their average costs down 12.8 per cent to £738.93.

All age groups had seen 12-month falls of at least 5.4 per cent, except those aged 70 or above who had had to settle for a 3.9 per cent fall in premiums.

On average, those aged 60-69 had the cheapest annual insurance (£342.73) while the 17-22 age group had the most expensive (£1,210.54).

The introduction of ''gender neutral'' pricing, following a European ruling that stopped insurers offering a different price to men and women, has also had an effect according to commentators.

However, the recent fall notwithstanding, car insurance was still twice the cost of six years ago.

According to Simon Douglas, director of AA Insurance, insurers were facing a fast-widening gap between premium income and claims costs, from  injury claims and fraud, which led to sharp premium increases between 2009 and 2011.

The gap was closing and premiums were falling again thanks to competition, as also improved fraud detection by the insurance industry and tightening of the law that was beginning to curb the number of spurious new whiplash injury claims, he said.

The news that hundreds of rogue 'no-win, no-fee' claims firms had been reined in was welcome and, in part, falling insurance premiums reflected that, he added.