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Motorists are being warned that insurance premiums will continue accelerating as insurers look to recoup losses from payouts and administration costs.

Figures show that premiums over the last year have already been driven up by an average of almost £100. However,experts at market analyst Datamonitor now predict that motorists can expect similar rises in the next 12 months.

They also warn there may never be a return to the motoring insurance boom of the mid to late nineties when competing insurance companies put the cost of many premiums into reverse.

Instead, more rises are expected with AA Insurance's premium index already showing that the average cost of a fully comprehensive policy rose from £363.85 in January 1995 to £602.53 at the start of this year.

Datamonitor said that much of the rise has been due to 'huge' underwriting losses, meaning that many firms now need to generate cash quickly.

The company added that although such losses dropped to £1.31bn in 1999 from £1.47bn the previous year, the sum was 'still considerable'.

Strategy Change

Since then, insurers have also had a change of strategy in an attempt to return to underwriting profitability. Although average premiums were predicted to rise again by about £100 this year, the increase could still be as much as 25% on some policies, said Datamonitor.

On a pound-for-pound basis, third party policyholders are also likely to continue to be penalised as insurers look to get more customers to opt for fully comprehensive cover.

Protecting Your Investment

After spending loads of money buying your car, how do you protect that investment? The answer - insurance. Insurance is a legal requirement for any driver. There are three main types, all with their own pros and cons, covering you against damage to the car, personal injury to youself, your passengers and even pedestrians.

The three main types of policy are:

Comprehensive is the most popular and covers repairs, theft of belongings, fire and medical expenses following an accident

Third party fire and theft covers liability to others, theft from a car or fire in a car. This means that, if involved in an accident, there is no cover for the vehicle itself

Third party covers only liability to others, there is no cover for your car

The level of cover you require will alter the cost of your insurance. The more cover under a policy, the greater the expense for the policyholder. Any further additions will increase the total cost. This could include general liability (damage to property or injury to people), or extra cover, such as the replacement of vehicles or breakdown recovery

Factors Affecting Insurance

The cost of insurance can also vary depending on the individual. The experience and age of the driver is of importance: many insurance policy costs are lower for mature drivers.

The number of previous claims will also affect the cost. If a driver has a history of accidents, this will increase the cost of protection. Convictions would raise repayment costs, as may the policyholder's occupation.

The type of car driven will also effect the cost; generally, the more expensive the car, the more expensive the policy.

Additionally, insurance companies will lower costs depending on the security of the car. If companies feel that a vehicle is a particular risk, then the policyholder will bear the cost in payments. Risks to the vehicle include living in an area where there are a high number of car thefts and damage to vehicles. Storing a vehicle in a garage overnight, fitting immobilisers or a good alarm system can all help lower the cost.

Listing one specific person as the driver will help reduce insurance costs. The greater the number of named drivers on a car, the greater gamble on the insurance company's behalf. Insurance companies do not like risk and will make that clear by asking for more money.

Getting Insured

Examining what criteria insurance companies work on may cause concern to a large majority of the general public. Under no circumstances should any individual give false information - the consequences would be far greater than any money saved.

Examining the conditions necessary for insurance is not meant as a scare tactic, but rather as an insight into areas of an individual's lifestyle that could affect the risk level.

No Claims Bonus

Insurance companies may include specific benefits to reduce the cost of insurance, such as no claims bonuses. These represent discounts for a claim free record; the greater the number of years that are claim free, the greater the discount.

Over time, this could represent a maximum discount of 65%. Protected bonus policies are also available that allow two claims in three years without losing a discount.

Examining different insurance companies' quotes will help to find the best discounts and rates.

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