Car insurance prices 'to soar by 25% this year' – check yours now

The cost of car insurance policies could rise by up to 25% in 2016, according to the AA, after 20% rises in 2015. But there are ways to lock in a cheap price now, even if you're not at renewal.

New figures from the AA's British Insurance Premium Index show the average cost of a comprehensive annual policy rose by more than £100 in 2015. In the final three months of 2015 the average comprehensive policy cost £625.70, up 20% compared with the last quarter of 2014.

The steepest rise came at the end of 2015, with the typical cost of comprehensive cover jumping by 10% in the last three months compared with the previous quarter. The AA says that's the biggest quarterly jump it's seen since 2010.

As a result, the motoring organisation is predicting a massive rise in prices this year, with the cost of cover potentially increasing by up to 25%.

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Check your cover now to beat the hikes

Car insurance is a grudge purchase – we've got no choice. Many leave it until renewal, but with prices predicted to rise steeply again this year, everyone should check now. See full info in our Cheap Car Insurance guide, but in brief:

• If your renewal's due within 60 days. Some firms' quotes are valid for 60 days, so if prices rise you're covered. These include Aviva*, Nationwide and LV* (see 20 long quote insurers for more). You can get quotes now, then find the cheapest insurance by following the steps below.
• If you're mid-policy. Firstly, use the info below to find your cheapest insurance. If it's much cheaper than it is now and you haven't claimed, for an admin fee of about £50 you can usually cancel your policy and get the rest of the year refunded (but you won't earn the year's no-claims bonus), locking in today's price. See full switching mid-policy info.

How to find the cheapest car insurance

For full help, check out our Cheap Car Insurance and Young Drivers' Insurance guides, but here are the basics:

• Combine comparison sites – never just use one. Comparison sites don't all cover the same insurers, so using more than one gives a wider spread. Our current order's Google*, Gocompare*, Moneysup* and Confused.com* (for why, see comparison order).
• Find deals comparisons miss, including a free £80 Karcher and £60 M&S voucher. Some deals aren't on comparisons, eg, Admiral Multi-Car gives an £80 Karcher pressure washer (take out cover before 31 March 2016), and Age UK, a £60 M&S voucher (before 2 Feb 2016). Plus big insurers Aviva* and Direct Line* are never listed on comparisons, so you could miss their prices. See our full hot deals comparisons miss.
• Counter-logical savings. Use trial and error to see if comprehensive's cheaper than third party, whether adding drivers slashes costs and if tweaking your job description cuts costs. Plus remember paying monthly is a loan.

Why are costs rising?

The AA puts the rising cost of motor insurance partly down to a tax hike imposed last year (see the Insurance premiums soar for millions MSE news story). The standard rate of Insurance Premium Tax – the tax paid each time an insurance policy is purchased in the UK – increased from 6% to 9.5% on 1 November 2015, as announced in the Summer Budget.

Michael Lloyd, director of AA Insurance, says personal injury claims – particularly those for whiplash – also continue to "haunt" the industry. It's estimated false and exaggerated claims add around £50 to the cost of every policy.

Research by AA Insurance last year suggested 11% of drivers thought it acceptable to make an insurance claim for an injury following a collision, even if none was suffered.

Mr Lloyd said: "The sooner new legislation to tackle whiplash claims becomes enshrined in law, the sooner that will be reflected in the premiums quoted for car insurance."

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