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Shock new rise in car insurance prices

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The cost of motor premiums has increased sharply over the past few months, according to new data. And there’s no sign of the trend going into reverse.

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Motorists are facing shocking new increases in the cost of car insurance.

This is according to the latest edition of the Confused.com Car Insurance Price Index, powered by Willis Towers Watson.

£78 rise in average prices

It has found that the typical comprehensive premium in the UK rose by 7% in the final three months of 2015.

The average driver now pays £672 a year for cover, up by £43 from the £629 they were being charged last September.

The research also shows a 13% increase in car insurance prices over the whole of last year.

At the end of 2014, the typical annual premium was just £594: it’s now £78 higher.

One factor behind the rise in insurance prices was the hike in Insurance Premium Tax, which was announced in George Osborne’s summer Budget.

Tax hike only partly to blame

This meant that, from November, the tax rate on motor and home policies, among others, rose from 6% to 9.5% -- supposedly in line with rates in other major economies.

Analysts said this would be likely to lead to an increase in motor premiums of around £20.

While unwelcome, this only goes part of the way to explain the premium hikes recorded towards the end of 2015.

Steve Fletcher, head of data services at Confused.com, said:

"Last year gave motorists a tumultuous ride, hitting them with consistent price rises and an increase in Insurance Premium Tax, both of which would have considerably dented their pockets.

"We're now in a position where average premiums are at the highest we’ve seen them since mid-2013."

No end in sight

Fletcher added that there were no signs that the current trend of rising prices is about to end.

"Unfortunately for motorists, we’ve now seen 11 consecutive months with no premium decreases, which would suggest that the trend is likely to continue,” he said.

"If this is to be the case, we would expect the average comprehensive cover premium to soon exceed the £858-a-year high we saw during 2011."

Better news for under-21s

Happy young driver

Behind the headline figures, the index revealed significant variations in price changes according to age and location.

Drivers under the age of 21, for example, did not see such sharp increases, with women in the 17 to 20-year-old bracket experiencing just a 4% annual rise in insurance costs to £1,558.

Meanwhile, men in this age category – the group that normally faces the highest costs – have seen their typical comprehensive premiums fall 44% from their 2011 peak of £3,829.

They are now paying £2,153 a year on average for cover.

Older motorists bear brunt of price hikes

Towards the other end of the age spectrum, the story for 2015 is quite different.

Men aged between 61 and 65 were hit with a 10% increase in premiums over the final quarter of last year – the steepest rise for any age group.

And on an annual basis, women aged 71 and above faced the sharpest price increase, with premiums for this age group up by 19% year on year.

On a geographical basis, drivers in Northern Ireland suffered most.

Their premiums rose 18% over the whole of 2015, with half of this increase recorded in the last three months of the year.

"Vital to shop around"

The average premium in the region now stands at £810 - £125 higher than in December 2014.

Similarly large price rises were recorded in much of Scotland, the index found.

Fletcher said that the recent increases in the cost of cover meant that it was even more important for drivers to seek the cheapest deal at renewal time.

"As ever, our advice to all drivers is to shop around at renewal to make sure that they are getting the very best prices without compromising on levels of cover."

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