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Unexpected fall in car cover but it's just a lull.

THE cost of car insurance fell unexpectedly in the first quarter of the year after premiums soared by a record 18.7% in 2009.

The average price of comprehensive motor cover dropped by 3.2% in the three months to the end of March to pounds 968, according to the AA.

But the group warned the lull in rising prices was likely to prove temporary, and it expects there to be further double-digit increases during the whole of 2010.

The group said insurers typically held their premiums during the first quarter, when competition for business is greatest, as most policies are renewed during the first three months of the year.

It added that the price fall was also driven by a drop in some expensive broker rates, bringing them more in line with the market average.

But the AA warned the cost of motor cover was likely to resume its upward trend during the coming two quarters.

Simon Douglas, director of AA Insurance, said: "Insurers no longer have reserves on which to call in order to keep rises in check.

"The same pressures as last year continue to force insurers to increase premiums: fraud and personal injury claims especially remain a significant concern." The cost of third party, fire and theft cover, fell by even more than premiums for comprehensive insurance, dropping by 4.5% to average pounds 1,196.

But the AA's shoparound index, which tracks the average of the three lowest quotes available for different risk profiles, rose by 0.6% for comprehensive cover and 4.5% for third party, fire and theft, suggesting the cost of the cheapest premiums available is increasing faster than the market average.

There was also a 4.6% jump in the average cost of comprehensive premiums offered through insurance price comparison websites. Despite the price fall seen during the first quarter, comprehensive premiums are still 13.4% higher than they were a year ago, while the AA's shoparound index has jumped by 22.5% for comprehensive policies and by 35.6% for third party, fire and theft cover.

Home insurance premiums saw a more mixed picture during the first three months of the year, with the cost of buildings cover rising by 1.8% to average pounds 203, while contents premiums fell by 2.6% to pounds 110.

But the combined cost of buildings and contents policies increased by 3.4%, which the group said suggested some of the discount offers available to people who bought both types of cover from the same insurer were drying up. Premiums for buildings cover have risen by 12% during the past year, but contents cover is only 2.1% more expensive.
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:Apr 28, 2010
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