Car insurance prices are likely to increase by a mammoth 15% by the end of 2015, the AA has said today.
The news comes as the motoring giant published its latest British Insurance Premium Index, which reveals the cost of car insurance has risen by 4.8% in the third quarter of the year, taking prices to an average £569.
This means prices have risen on average by 9.2% in the past 12 months, adding an extra £48 to the price of an average premium. See our Cheap Car Insurance guide to slash costs.
The hikes follow two years of falling prices, which came after predictions the Ministry of Justice would reform how personal injury claims, in particular whiplash claims, are handled.
But the AA says this year's price rise is a direct result of this reform not happening, and further suggests some claims-firms have found ways around existing rules.
The price of home insurance however has been falling steadily; a combined buildings and contents policy is down by 2.4%, taking average prices to £149.30 between July and September. This is down by 6.3% over the year. See our Cheap Home Insurance guide to cut costs further.
Insurance premium tax hikes
Insurance premiums will also be hit by an increase in insurance premium tax (IPT), which rises from 6% to 9.5% from 1 November.
This affects all car insurance policies, which start on or after this date, as well as other areas of insurance such as home, pet and mobile phone cover.
The AA believes this will typically add £20 to the average car insurance policy. However, it also warns that rising prices are likely to encourage drivers to falsify the information they enter onto insurance policies to get a lower priced quote.
How to cut car insurance costs
As the cost of car insurance is rising, and set to go up further, check now if you can cut costs.
You can slash your premium even if you're not at renewal. Unless you've claimed, for around £50 you can generally cancel and get a refund of the remainder of the policy, although you'll lose the year's no-claims bonus.