Cost of car insurance soars to more than £1,000

Young drivers and those in Greater Manchester and Liverpool are the hardest hit as insurers raise prices.

The cost of car insurance has soared to an average of more than £1,000 a year, a study has found.

Some providers are raising their prices as they tackle “crash for cash” scams and “excessive” numbers of whiplash claims.

The average cheapest premium for comprehensive cover sold directly jumped by 8.5pc year-on-year to £1,034, the AA British insurance premium index found. Young drivers bore the brunt of the rises, with premiums for men aged 17 to 22 at £2,792 in the second quarter of this year. Premiums also increased for women in this age group to an average of £1,995.

Greater Manchester and Liverpool were the most expensive regions for buying policies, with average quotes of £1,648. But some providers have been slashing their prices to build up their customer base.

[Related link: Compare quotes and see if you could save on car insurance]

Simon Douglas, director of AA Insurance, said the market was "in turmoil". He said "significant inroads" were being made to tackle fraudulent claims such as "crash for cash", although insurers were still handling "excessive" numbers of whiplash claims, which push up premiums.

Whiplash injury claims are said to cost insurers more than £2 billion last year, adding around £90 to the cost of a typical car insurance policy. The AA has said that over the past two years, claims for whiplash injury contributed to the biggest car insurance premium increases ever recorded.

Application fraud, where buyers withhold or change information to reduce premiums, was also being targeted by insurers.

"We expect the industry eventually to have routine access to DVLA data and the sooner this happens the better," Mr Douglas said. "It will allow fraudulent applications to be weeded out. Insurance companies are already exchanging information about people who appear to be manipulating data in order to cut the price quoted."

While companies making big premium cuts on price comparison sites to draw in customers was “great news for consumers,” he warned they needed to ensure they were getting “good cover, not just a good price."

Scotland remains the cheapest region to buy car insurance, with an average lowest quote of £727.

[Related link: Check to see if you're paying more than you need to]

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