Special Report on the Motor Show (8): Premiums set for return to earth at last: Insurance costs have risen by about 25 per cent a year for the last two years but the worst may be over for the time being, says Tony Bosworth

INCENSED drivers have seen their insurance premiums rocketing over the past two years. The majority will not have had an accident and so not have claimed on their policies.

On average, insurance premiums have risen by around 25 per cent each year for the past two years, while for drivers of high performance cars, and owners of the clutch of cars which have poor factory-fitted security systems, there have been some price hikes of around 60-70 per cent.

There is now evidence to suggest that the worst may be over, at least for the time being.

Nevertheless, Michael Auld at Guardian Royal Exchange, one of the UK's biggest insurance companies says: 'Unfortunately, the number of accidents is still steadily increasing. Where we were traditionally seeing one in five people claiming on insurance, we are now seeing one in three.'

Another reason for the overall increase in rates has been the dramatic increase in car crime, now the most common crime in England and Wales, coupled with the well-publicised spate of joy-riding.

'This has been one of the reasons why we've introduced some hefty excess charges on specific cars,' says James Duffell at Norwich Union, the UK's biggest motor insurer. 'For example, drivers of a Ford Sierra Cosworth may well have to pay an excess of pounds 1,000, and that means they tend to drive more carefully, and make sure that the car is properly alarmed.'

Another problem is the increasing numbers of people driving around without any form of insurance. This is bad news for the insurance industry and for those drivers who may find themselves colliding with an uninsured driver.

The Motor Insurers' Bureau administers a fund that pays damages to drivers who have been involved in an accident with an uninsured driver. MIB estimate that by the end of this year they will have paid out around pounds 60m in claims, a 50 per cent increase over last year.

But it's not all doom and gloom. Most in the insurance industry believe the big rises in premiums are set to become less common, because the companies have begun to recoup losses on car insurance. There is also evidence of a growing awareness that alarms and other security devices can cut down on theft, and therefore, ultimately, on insurance premium rate rises, so more drivers have them fitted. And an increasing number of insurers are offering discounts to drivers who have some form of approved security fitted to their cars.

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