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Car insurance premiums jumped by 8% in past year

car crash Image copyright Getty Images

The average car insurance premium rose by 8% in the past year to £462, says the Association of British Insurers.

The ABI said the £34 rise had pushed average premiums to their highest level since its records started in 2012.

The main reasons were higher repair bills, increases in insurance premium tax and the continuing issue of whiplash claims.

However, the figures are much lower than those recently published by the price comparison site Confused.com.

Earlier this month it said the average premium had risen by £110 in the past year, to the much higher level of £781 for a comprehensive policy.

For its part, the ABI said further increases were inevitable as the government has already decided to raise insurance premium tax again on 1 June, from 10% to 12%.

"Further rising costs could spell more misery for millions of motorists," said the ABI.

"The change to the way in which compensation for serious personal injuries is calculated - the discount rate - will lead to massive additional costs for insurers."

Call for reforms

The insurance industry was shocked in February when the government announced a major change to the formula that governs the value of payments made to people who have suffered long-term injuries.

That cut the so-called discount rate, which helps to calculate the lump sums that insurers pay to victims so that they can, in turn, generate a steady income flow for the rest of their lives.

At the time, accountants suggested that this legal change would add so much to their costs that typical car insurance premiums would rise by as much as £75 per year.

That change came into effect a month ago.

Rob Cummings of the ABI said called on whichever party wins the election to take steps to cut the cost of car insurance.

"The new government must push ahead with reforms to tackle low value whiplash-related claims and introduce urgent reforms to change the framework for setting the Discount Rate," he said.

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