UK motor insurance premiums rose 5 pct in second quarter

LONDON, July 21 (Reuters) - British car insurance premiums jumped by more than 5 percent in the second quarter compared with the previous three months, and a rise in insurance tax is likely to add to price increases, recovery service the AA said on Tuesday.

The average quote for an annual comprehensive car insurance policy was 549.46 pounds ($854.74) in the second quarter, the AA said in a statement, a rise of 5.2 percent over the first quarter and 5.5 percent over a year earlier.

FTSE-100 firms such as Aviva (Other OTC: AIVAF - news) , Direct Line and RSA operate in the highly competitive car insurance market.

"Insurers have been releasing their reserves to maintain their competitive edge to the point where this is no longer sustainable -- and we are seeing premiums beginning to rise once more," Janet Connor, managing director of AA Insurance, said in the statement.

Connor said an increase in insurance premium tax to 9.5 from 6 percent, announced in this month's budget statement, would likely put further upward pressure on premiums, adding "those on the lowest incomes may consider driving without cover".

Data last week from price comparison website Confused.com and consultants Towers Watson also showed that after three years of falling prices, car insurance premiums rose in the second quarter by an average 3.6 percent over the last 12 months.

Home policies for buildings and contents insurance showed rises of 1.3 percent on the quarter, the first gains since 2012, the AA said in a separate survey on Tuesday.

($1 = 0.6428 pounds) (Reporting by Carolyn Cohn; Editing by Mark Potter)