Car Insurance

It has never been more important to shop around to get the best insurance deal.

The price war, which has seen car insurance premiums fall by 20 per cent in the last two years, is now denting profits.

And all the indications are that firms can’t hold out much longer before passing on costs to the customer.

“Intense competition has forced premiums down to a level that is unsustainable,” said Sandy Dunn, managing director of Touchline Insurance. “Some insurers have pulled out of the motor insurance market completely while others have seen their profits slashed. Premiums are starting to rise already.”

Over-the-phone insurers Direct Line helped spark off the cut in premiums…but even they have experienced a fall in profits.

And Mr Dunn believes home owners as well as motorists will have to pay more.

Claims for weather damage, subsidence and fires rose by pounds 200million to more than pounds 800million last year.

Analysts expect them to rise even further, with the winter freeze after last summer’s heatwave taking a further toll on homes.

The more pay-outs insurers make, the more likely premiums will go up as they struggle to recoup their costs. In trying to get the best deal, it’s worth remembering that you no longer have to take the house insurance offered by your mortgage lender.

Some insurers now offer “no claims” discounts on home insurance as they have been doing for years on car premiums Legal & General are one of the latest with their new Rainbow home plan.

After a year, policyholders get a 10 per cent discount if they haven’t made a claim, which rises to 15 per cent after two years and to 20 per cent after three years.

Direct insurers Churchill offer a 30 per cent discount. To qualify, you’ll need five claim-free years.