Drivers face more insurance hikes

Motorists are facing further hikes in premiums as insurers try to recoup huge losses racked up last year, a new report claims.

Premiums went up by 10 per cent on average in 2010 but losses at the UK's motor insurers still topped £2bn as claims soared, the accountancy firm Deloitte said in an analysis of the UK car insurance market.

James Rakow, an insurance partner at Deloitte, said the latest blow to the industry will mean higher premiums in 2011 as firms try to claw back the losses, which have been sparked by the surge in no-win-no-fee personal injury claims. With motorists already under pressure from record petrol prices, the AA recently reported premiums on new car policies could rise by as much as 30 per cent, though the average may be lower as customers with good records get cheaper deals to encourage them to renew.

The scale of the problems facing the industry are illustrated by Deloitte's estimates that, with costs, insurers paid out 120p for every 100p worth of premiums received last year, with some having to pump millions into their reserves to meet the rising claims.