The AA recently reported that premiums rose at a rate of 33 per cent in 2010. The motoring organisation also stated that there could be as much as an additional 20 per cent hike this year as well. However costs have not increased due to a higher accident rate but to higher costs associated with road traffic accident claims.
Fraudulent claims have been one of the primary drivers of higher rates for even discount car insurance lately. Experts say that honest drivers pay about £80 extra on their policies due to fraud. Other sources include fees and charges originating from car hire companies, claims management firms, and personal injury lawyers.
Nearly 50 per cent of the average insurance premium goes directly to cover costs associated with accident claims. The Association of British Insurers also states that 10p of every £1 paid in premiums goes directly to the legal industry.
Credit hire companies also take a slice of the pie. These middlemen firms provide loaned cars to accident victims, and the insurance company of the driver who caused the accident foots the bill. The use of such a firm can add approximately £1,500 to a claim on average, according to the AA and fellow insurer Allianz. The firms also stated that each motorist’s premiums rise by £44 to cover these costs.
Many of these car hire firms conduct questionable practices, as well. One common behaviour is for the firm to send a damaged car to the garage on a Friday for repairs, necessitating a four-day car hire over the weekend as the garage shuts down for the weekend.