The sharp car insurance premium increases of 2009 came to an unexpected halt over the first quarter of 2010, according to the latest benchmark AA British Insurance Premium Index.

The Index, which tracks the movement of both car and home insurance premiums every quarter, saw the average quoted premium for a comprehensive car insurance policy fall by 3.2 per cent, although the Shoparound premium – an index of the cheapest quotes – showed a small increase, underlining the pressure that premiums are still facing.

The AA’s analysts, however, believe the respite is temporary and expect the upward trend to resume over the rest of 2010.

Average premiums quoted on price comparison sites, however, continued to show an upward trend.

Car insurance premiums take a breather

Main Index findings for first quarter 2010
* Average quoted premium for an annual comprehensive car insurance policy fell by 3.2% to £968.26;
* Average quoted premium for Third Party, Fire & Theft (TPFT) cover fell by 4.5% to £1,196.24

Shoparound index, an average of the three lowest quotes for each ‘customer’ in the basket of risks
* Comprehensive cover rose by 0.6% to £616.62;
* TPFT rose by 4.5% to £823.29

Over the past 12 months
* Average quoted premiums for comprehensive cover rose by 13.4%;
* TPFT cover, typically bought by young and newly-qualified drivers, rose by 19%;
* The Shoparound premium rose by 22.5% over the year for comprehensive cover and by 35.6% for TPFT

Comparison site average quoted premium for first quarter of 2010
* Average quoted premium for comprehensive cover rose by 4.6% to £695.95;
* TPFT rose by 9.2% to £751.58

Comparison site Shoparound index: an average of the three lowest quotes from the comparison sites for each ‘customer’ in the basket of risks
* Average comprehensive Shoparound premium fell 1.0% to £472.05;
* Average TPFT Shoparound premium rose 2.0% to £583.34

Note: the same basket of risks is used for both main and aggregator Indicator.

Simon Douglas, director of AA Insurance, says that while the sudden stall in the upward premium trend is a surprise he points out that a respite of this sort isn’t uncommon during the first quarter.

“Most years we have seen insurers hold their premiums during the first quarter of the year, when there is greatest competition for business. It’s when most cars are sold and historically, it’s when most car policies are renewed.

“Last year, for the first time, premiums rose during the first quarter and I expected the same to happen this year. However, while many insurers have shown modest increases, the quarterly fall can be mainly attributed to a drop in some expensive broker rates bringing them more in line with the market average.”

The Shoparound index, which is closer to the premiums customers can expect to pay if they shop around, showed modest rises over the first quarter, suggesting that the cheapest premiums on the market are continuing to increase faster.

Douglas adds: “There’s also evidence showing that while market average premiums are increasing more quickly on the comparison websites, a fall in the Shoparound average suggests that there are still some cheap deals being offered in what is the most competitive quarter of the year.”

The average quoted premium for comprehensive cover on comparison websites rose by 4.6 per cent and for TPFT cover, by 9.2 per cent.

The Shoparound analysis of comparison websites showed that comprehensive premiums also fell but by 1 per cent. TPFT premiums rose by 2 per cent, compared with a fall on the main Index.

Douglas believes that after the first quarter, premiums will resume their upward trend and expects premiums over the next two quarters to show significant rises taking increases into double digits by the end of the year.

“Insurers no longer have reserves on which to call in order to keep premium 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.”

Key findings: Shoparound premiums by age and by region

Women take the brunt of price rises
* Premiums for young female drivers (aged 17-22) have risen fastest over the quarter, with a 7% increase in average Shoparound premium for comprehensive cover. Nevertheless, women typically pay almost half the premium price of men in this age group. Premiums for women aged 23-29 also rose, by 3.1%, while at the opposite age extreme, premiums for women aged 70-plus rose by 1.4%.
* Premiums for men aged 17-22 also rose, but by only 2.8%
* Biggest fallers were those aged 50-59 (men down 6.1%, women down 4%)

London, South and Granada rise fastest
* The Granada region (North-West) saw the biggest rises, with a 5.1% increase, followed by London (3.0%) and the South (2.9%)
* Biggest regional falls were Central (5.4 per cent) and Scotland (3.4%)