The high tide has passed for motor policies

It can still be expensive to insure your car, but there are ways to drive a good deal
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Motorists whose car insurance is up for renewal need to think carefully before they cough up for another year's cover with the same insurer. Even though the steep increase in premiums over the past couple of years is not expected to happen again in 2002, motorists will still have to pay 8 to 10 per cent more than last year.

The cost increase in motor insurance is partly due to the growth of compensation culture, along with legislation introduced in April 1999 making it easier for NHS trusts to reclaim the cost of treating road accident victims. Added to this, insurers were hit hard last year, with big payouts following the US terrorist attacks on 11 September, the bad weather and an increase in personal injury claims. It is surprising, therefore, that the rise in premiums has not been greater.

"The situation for motorists this year could have been much worse than an 8 to 10 per cent rise," says Charles Crawford, technical services director of Churchill Insurance. "The cost of claims is continuing to increase and it is worth remembering that car insurance is a loss leader. For every £100 paid in premiums in 2000, insurers paid out £115 in claims and administration, so the market needs to push up premiums to make it profitable."

Luckily, however, competition in the motor insurance market has kept costs under control. In previous years this has not always been the case: while drivers with comprehensive insurance saw their premiums increase by an average of 9 per cent last year (according to the AA's quarterly British Insurance Premium index), this was rather less than the 19 per cent rise in 2000.

"These changes show a real slowdown in the rate of increase seen previously, when the insurance industry was pulling itself out of loss," says Andrew Briscoe, managing director of AA Insurance Services.

Mr Crawford believes the range of choice available to motorists is also having an effect. "There are lots of insurers competing for business, so that tempers the rate increases," he says. "We reckon policies will probably rise by about the same amount next year because of this."

The traditional direct insurers now face competition from a range of new players, including the supermarkets. Tesco Personal Finance joined forces with Direct Line two years ago to offer motor insurance, while Sainsbury's Bank is planning to offer motor policies in conjunction with Esure, the direct insurer, in the spring.

There is also a range of specialist insurers that cater for anyone other than young male drivers. Diamond supplies insurance just for women, while Esure offers preferential rates for drivers with a clean record in the form of a 65 per cent no-claims discount after five years, rising to 75 per cent after 10 years. The company also offers a 45 per cent no-claims discount on home and contents insurance.

We are more likely to swap motor insurance than any other form of cover, because making a few calls or surfing the internet has the potential to save us a lot of money. Based on the AA's survey, the average comprehensive policy costs £670 – but you can reduce this to £437 by shopping around. Meanwhile, the average non-comprehensive policy is £787, or £479 after shopping around.

If you aren't happy with your insurance quote, try to find a cheaper one. Compare quotes by ringing around several insurers or surfing the internet. Alternatively, go to an insurance broker.

One way of cutting your premiums is to take a larger excess on any claim, limit the number of drivers covered and steer clear of an "any driver" policy. If possible, you should park your car overnight in a garage, although not all insurers take this into account when calculating your premiums.

Once you have some quotes, approach your current insurer and see if it will offer you a better deal. If so, check the small print to make sure your cover is not compromised. If you don't get an improved offer, it is worth switching insurer, but again check what cover is included.

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