Car insurance prices have seen a "sharp increase" in the second quarter of the year, while home insurance costs have also risen, says the AA. But it adds that prices are likely to continue rising this year.
Its latest British Insurance Premium Index, which measures the average price of five of the cheapest home and car insurance premiums directly from companies, brokers and price comparison websites, reveals that the average price for a typical comprehensive car insurance policy has risen 5.2% in the second quarter of 2015.
It takes the average price from £522.12 between January and March, to £549.46 between April and June 2015. This represents a 5.5% annual increase compared to the same period last year when the average policy cost £520.94.
Third party, fire and theft premiums meanwhile have risen by 2.7% over the quarter from £726.90 to £746.21, which is a 5.8% increase over the past 12 months. See our Cheap Car Insurance guide to compare quotes, cashback and deals.
Drivers aged between 23-29 have suffered the highest premium jump this quarter seeing an increase of 6.2% taking prices to £682.62, while drivers aged 70+ have seen the smallest premium increase of 3.8% taking prices to £392.13.
'The days of cheap car insurance premiums are over'
Janet Connor, managing director of AA Insurance says: "Thanks to bruising competitive pressure, premiums have been falling while claims costs have continued to rise – particularly for personal injury. Indeed, the number of injury claims reported has been increasing at around 10% per annum since 2013.
"So insurers have been releasing their reserves to maintain their competitive edge to the point where this is no longer sustainable – and we are seeing premiums beginning to rise once more. The days of cheap car insurance premiums are over – price rises are inevitable."
Home insurance falls also 'over'
Separately the AA says the cost of standalone buildings and contents policies each rose by 1.3% over the second quarter of 2015.
This takes building insurance prices from £106.81 between January and March this year to £108.15 between April and June, and contents prices from £60.41 to £61.18 over the same time period.
Combined buildings and contents insurance has fallen a fraction from £152.89 between January and March to £152.27/year over the three months ending 30 June.
But over 12 months premiums have fallen by 4.8% for buildings, 6.8% for contents and 6.4% for combined policies. However, Connor warns that prices are likely to continue rising, she says: "I believe that these modest premium increases suggest that the falls are over."
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Prices to continue rising
In the Summer Budget 2015, Chancellor George Osborne announced a rise in Insurance Premium Tax (IPT) from 6% to 9.5% from November (a 58% increase). The tax hike applies to pet, car, mobile, contents, buildings and private medical insurance.
The AA says the move will add around £18 to the cost of a typical comprehensive car insurance policy as insurers have "no capacity to absorb that cost and will have to pass it on".
It adds that for the average home insurance policy, customers will have to pay around £5 more.