U.K. car insurance premiums climbed at least 12 percent during the second quarter, the fastest rate on record, according to the Automobile Association Ltd.
Comprehensive car insurance increased 12.1 percent to 980 pounds ($1,507) in the three months to June 30. Meanwhile, third party, fire and theft cover, typically purchased by younger drivers, increased 15.8 percent to 1,225 pounds.
According to Simon Douglas, a director at AA insurance, "Many people who may not have bothered to make a claim for minor or even non-existent injuries in past accidents are being encouraged to do so by unscrupulous accident injury claim lawyers."
Many of the largest auto insurers in the U.K. are raising prices, as record low interest rates have reduced insurers' investment returns, diminishing profits. Meanwhile, car rental costs and lawsuits have increased the overall cost of claims to 22 percent more than insurers receive in premiums.
According to Douglas, "Insurers have been making huge underwriting losses. I won't be surprised if, by the end of 2010, we'll have witnessed an unprecedented 50 percent rise in just two years."