Car insurance premiums are set to rise following a sharp increase in the costs incurred by insurance companies, it has been revealed.
Premiums are expected to rise by 15 per cent over the next year, with younger drivers expected to bear the brunt of these increases. Currently, drivers under 22 have to fork out an average of £2,537 a year for cover, but this figure is expected to pass the £3k mark during the next twelve months.
Insurance companies are blaming the rising costs on increasing concerns by reinsurers over the compensation paid out to victims following traffic accidents.
Essentially, reinsurers offer insurance for insurance companies by taking on the risks of the insurance firm.
Over the past two years, there have been dramatic changes in the way in which courts award compensation to the victims of accidents. Previously, it was customary for a lump sum to be awarded to the claimant; however, courts are now increasingly offering annual payments to serious accident victims.
These added costs will inevitably be passed on to the policyholder, resulting in a rise in insurance premiums.
Peter Harrison, car insurance spokesman for MoneySupermarket.com, said: "Any additional cost won't go down well and I'm sure that cost will be passed on."
Also of interest...
