Office for National Statistics says that higher insurance premiums (up by 6.3% in the month of April) have contributed much to the inflation that has broken all records. If you compare car insurance premiums after a gap, you will notice a sharp rise in it. It has also been observed that petrol and car insurance premiums are two commodities which have been recorded for the fastest price rise. The annual rise for car insurance premiums is observed around 26.1 per cent. Even though car insurance is a smaller sector for spending by many households, but this annual price rise has contributed by 0.1% to the annual rate of inflation (which is 3.7 per cent).
ABI (The Association of British Insurers) says the major factor responsible for rising car insurance premiums is the growing legal cost. The ABI also said the fast growing legal costs attached to the car insurance, is the prime reason for the expensive insurance, otherwise insurance companies are ready to pay to the claimants. Such costs add up to 10 percent of the premiums paid by car owners. So, it becomes important to reduce these costs. If you are planning to buy a cover for your vehicle, keep a track of all the costs involved and compare car insurance premiums from different companies with a detailed breakup of the various costs attached with it.
Government figures show that for a claim of personal injury amounting less than £10,000, 76p is spent in legal costs for every £1 paid as compensation. These costs get even worse with smaller claims. Market competition has helped in keeping premiums low to an extent despite the pressures of rise in the value and volume of bodily injury claims. In addition, frauds and fake claims also play an important role in inflating the premiums for car insurance.
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