Car insurance costs fell in the first three months of the year, according to the AA, but it warns premiums could 'spiral' unless there is a crackdown on fraudulent claims.

Based on the AA's "Shoparound index", the latest figures from the AA show that annual comprehensive cover in the first three months of this year was £530.47 – a fall of 5.8% on the first three months of last year and down 1% on the last three months of 2014.

Third-party insurance, meanwhile, averaged £731 in January to March this year – a fall of 5.9% on the first three months of last year and 0.7% down on October to December last year.

Drivers aged 23-29 have experienced the biggest annual declines, with their average insurance costing £652.61 – 9.3% lower than in the first three months of last year.

In contrast, average premiums have risen 1% compared with the last three months of 2014 for those aged 60-69, to £305.19, and by 4.9% to £387.07 for those aged 70 and over. See's Cheap car insurance guide to compare quotes, cashback and deals.

Dramatic increases possible

However, AA Insurance managing director Janet Connor warns that prices could increase dramatically because of the UK's "claims culture", which is being encouraged by cold calls from claims management firms.

She says: "Despite the premium falls over the past couple of years, the cost of cover remains higher in the UK than in most other European countries, thanks to the claims culture in the UK. While the number of crashes on Britain's roads has fallen, the number of injury claims has risen.

"My greatest fear is that if insurance fraud such as whiplash injury claims isn't brought under control and quickly, we will see a repeat of the spiralling premiums of 2010 and 2011, when the cost of the average policy rose by over 40% in just 12 months."

She adds: "We're starting to see insurers quoting higher prices, and I think that's the beginning of a trend, but the market remains very competitive."