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UK car insurance to be hit by rising costs

According to This Is Money, motorists could be hit by increasing costs as one of the UK's biggest car insurer looks set to raise its premiums by 20% in 2007.

Insurance giant Royal Bank of Scotland Insurance, which owns brands such as Direct Line, Churchill and Privilege, has admitted that it is starting to increase premiums, following an earlier move by Norwich Union, which increased rates by 40%.

The increases are claimed to be in response to the growing costs of personal injury claims, taking into account associated medical bills, compensation and legal fees. In addition, the insurance industry is also suffering from the rising problem of accidents caused by drivers without insurance.

Cited in This Is Money, Henry Stevens, director of underwriting at the Admiral Group, said: We believe Royal Bank of Scotland Insurance is the decisive factor in taking the market up in price. If it were to sustain a series of increases over the next 12 to 18 months, that would take rates up substantially.

Royal Bank of Scotland Insurance’s motor policy premiums have already increased by 5% across all key brands since September 2006. If the growing trend was to continue, 2007 would see a 20% increase.

Industry experts believe that such rises are on the horizon, with the average premium on a comprehensive policy expected to be pushed up by GBP152 to GBP762 in 2007.