Figures released by the Association of British Insurers (ABI) have today revealed that the cost of car insurance has rocketed to a record high.
The average cost of a premium went from £48 to £484 a year in the three months leading up to June alone.
The increase accounted for an 11% year on year rise which is four time the rate of inflation and in June alone, the average premium reached £498, a number expected to rise even more in the future.
The ABI has been collecting data for over five years and attributes the sharp rise to changes in the amount of money victims are now expected to receive following a crash.
Insurers’ payments to those with life changing injuries are reduced to account for the interest the lump sums can earn.
But the Ministry of Justice has cut this discount rate from 2.5% to minus 0.75%.
Insurance premium tax – a levy on all policies – also shot up from 10% to 12% on June 1.
Director General of the ABI, Huw Evans, said;
“The UK is one of the most competitive motor insurance markets in the world, but the unprecedented increase in claims costs is driving up prices to record levels.
“Most younger and older drivers are likely to face increases even higher than this, hurting people who can least afford it.
“Worryingly these increases are unlikely to be the end of the road if reinsurance premiums go up at the end of the year, adding further costs to insurers.”