UK car insurance premiums jump 31 pct - AA

Trade the News

Friday September 03, 2010 05:01:23 AM GMT

* Average premium 704 pounds, up 31 pct in past year - AA

* Increase fuelled partly by fraud - AA

LONDON, Sept 4 (Reuters) - The cost of car insurance in Britain has risen by almost a third in the past year, its biggest ever increase, as insurers seek to offset a sharp rise in claims expenses driven in part by fraud, AA Insurance said.

Fully comprehensive cover currently costs an average of 704 pounds ($1,089), an "unprecedented" increase of 31 percent compared with a year ago, the company said on Saturday.

"The AA has been tracking the quarterly movement of car insurance premiums across the country for 16 years and premiums are now rising at their fastest ever rate," said AA Insurance director Simon Douglas.

British motor insurers have been hiking their prices for the last 18 months in an effort to keep pace with soaring payouts to customers. The industry blames the increase on the growing influence of claims management companies who seek to maximise compensation payments to accident victims in return for a fee.

Part-nationalised lender Royal Bank of Scotland, Britain's biggest motor insurer, last month revealed that soaring bodily injury claims pushed its insurance unit to an operating loss of 253 million pounds in the first half, compared with a profit of 223 million pounds a year earlier.

AA Insurance, part of roadside recovery group AA, said rising payouts are also fuelled by fraud, including claims for non-existent injuries and pre-existing damage to vehicles. ($1=.6465 pounds) (Reporting by Myles Neligan; Editing by Greg Mahlich)

(c) Copyright Thomson Reuters 2010. Click For Restrictions. http://about.reuters.com/fulllegal.asp