MOTORISTS could face the biggest hike to their premiums since 2011 as insurers seek to improve their profits, a new report has warned.
The cost of car insurance is expected to rise by 8 per cent in 2016, adding around £30 to the average premium, according to consultants EY.
Its report said insurers have been battling to cover the rising costs of claims and need to pass these costs back to consumers.
Tony Sault, of EY, added: "Insurers are a long way from achieving a repeat of 2013, when the industry turned a profit for the first time in 20 years, so a further hike in premiums comes as no surprise.
"By passing some of the costs on to the consumer, the industry may be able to reduce the amount of reserves they have to release compared to previous years, but even an 8 per cent rise in premiums will fall short of securing profitability."
Kasey Cassells, from price comparison site uSwitch, warned the price hikes would leave many struggling to cover the cost of driving.
She said: "This predicted hike in premiums is another blow to drivers who have already been hit by a rise in insurance premium tax this year.
"Young drivers who tend to have the highest premiums to pay could see their policy increase by £40 due to the insurance premium tax hike.
"This additional increase of a further £30 per policy may well push more drivers off the road as they struggle to cope with the ever rising cost of driving."
Motorists in Scotland have already faced the largest hikes in insurance premiums anywhere in the UK.
In April, it emerged that while average quotes for comprehensive car insurance had decreased by 0.8 per cent to £591 over the previous year, motorists in rural parts of Scotland had seen their premiums spike by up 4.2 per cent.
Drivers in the Scottish Borders experienced the biggest increase, with a typical premium up £17 to £408.
But despite the increases, Scottish drivers still pay far less in insurance than the average UK motorist.
Meanwhile, a new report part-funded by the Freight Transport Association (FTA) has shown that lower petrol and diesel prices throughout 2015 have given the UK economy a huge boost.
The study commissioned by FairFuelUK and published by the Centre for Economic and Business Research (CEBR) confirms that low forecourt prices raised UK GDP by 0.6 per cent, stimulated an extra £11.6 billion of economic activity, created 121,000 jobs and boosted government tax revenues.
With fuel duty at 57.95p a litre, the extra 517 million litres of road fuel sold in the first three quarters of this year have generated an extra £300 million in fuel duty revenue.
James Hookham, deputy chief executive of the FTA, said: “The link between fuel prices and growth was confirmed by the Treasury’s own modelling last year and now CEBR’s evidence, part-funded by FTA, shows just how big the gains were and the economic folly of resorting to fuel duty or vehicle excise duty increases in order to balance the books or supposedly ‘punish’ users of diesel fuel. With economic growth slowing this year, the Chancellor needs to listen to the numbers not the slogans.”
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