Why car insurance could rise above £1,000 next year

Drivers in Britain could pay record highs for their car insurance in 2018, with estimates of the average premium hitting £1,000 or more.

Insurance comparison website Confused.com, together with broker Towers Watson, analysed four million quotes and found premiums were £110 more in March compared to last year, says the BBC.

Average policy quotes were £781 for comprehensive cover - and, the Daily Mail says, that is expected to rise above 2011's record of £858 later this year.

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It could then go on to break £1,000 next year, thanks to a series of cost pressures.

Insurers say a hike in the insurance premium tax from ten per cent to 12 per cent this June will impact on all general policies.

More critically, earlier this year the government announced it is dramatically reducing the "discount rate" limiting compensation payouts to claimants facing long-term personal injury, which will also add to the cost of premiums.

At the moment a long-term payout is reduced by a set rate to reflect the amount of interest a claimant could earn by investing the money.

However, at 2.5 per cent, this rate is well above the levels currently available on the savings market, so is being reduced to 0.75 per cent.

The government said it has "no choice" and that the law on payouts is "absolutely clear".

Also adding to the pressure on prices is the higher cost of repairs for newer cars due to the complexity of the vehicle's mechanic. "A prang on a bumper is now not only a piece of plastic to be replaced, but a cacophony of sensors and camera," said a spokesman for Confused.com.

Meanwhile, the Mail cites "a flood of bogus whiplash claims" adding to insurers' costs.

Rates quoted in the research are ahead of the average premium that is eventually paid, which the Association of British Insurers' (ABI) data, based on actual transactions, put at £462 for the final three months of 2016.

However, the association is still tracking an upward trend that is increasing the cost for drivers.

Rob Cummings, of the ABI, said: "Motorists are being hit by a cocktail of rising costs... It is therefore vital the government legislate for a new way of setting the discount rate."