Motor insurance premiums to soar: Rates may be up to 30 per cent higher than a year ago, writes Maria Scott

MOTORISTS must budget for big increases in the cost of insuring their cars again this year.

This weekend many insurers are raising premiums by more than the rate of inflation. There could also be more increases later in the year.

Policyholders cannot be charged extra for their cover once they have paid for a year- long contract. But most companies are increasing premiums several times a year, which affects people as they renew policies. They may be quoted rates 20 or 30 per cent more than they paid a year ago.

The only good news for motorists is that the increases being imposed now are a little smaller, in percentage terms, than they were last year.

Nevertheless, the cost of car insurance is beginning to assume nightmare proportions, especially for young drivers of racier models who live in theft- prone areas. According to Les Brown, insurance liaison manager at broker Swinton Insurance, some of the astronomical premiums being quoted at present come from companies that are, in effect, pricing themselves out of particular sectors of the market. Axa Insurance, for example, is not chasing business from young people driving high-performance cars, whereas Sabre tends to specialise in it.

Most companies' premium rates have been restructured in the last year. Under a new rating system introduced last summer, companies now group cars into 18 risk bands. Previously there were only nine. The effect of the change has been to widen the gap between the cost of insuring high- and low-risk cars.

Swinton has been notified of increases from this weekend by more than half a dozen insurance companies, including Sun Alliance, Zurich and Legal & General as well as a number of Lloyd's market syndicates.

Mr Brown said the increases tended to be around 3 or 4 per cent.

Swinton obtained quotations last week for a 25-year-old 1990 Ford Fiesta driver living in London E1, for fully comprehensive cover with maximum no-claims discount. The highest quote of pounds 1,072 came from Axa Insurance, and the lowest, pounds 416, from Eagle Star.

Mr Brown said drivers needed to look further than price. 'Some policies pay out an unlimited amount to replace a car radio but others stop at pounds 100. The sums payable for injury vary a lot, as do medical expenses pay-outs.'

Legal & General is raising motor premiums by an average of 5 per cent from this weekend, although the cost of cover for people under 30 is rising by an average of 10 per cent.

Zurich Insurance is putting up premiums for comprehensive motor policies by 6 per cent this month and 10 per cent on third party, fire and theft policies.

----------------------------------------------------------------- WHY IT PAYS TO SHOP AROUND ----------------------------------------------------------------- Driver: 25-year old man in London E1 Low: Eagle Star. . . . . . . . . . . . . . . . pounds 875 High: Axa Insurance. . . . . . . . . . . . . . pounds 3,256 Driver: 50-year old man in London E1 Low: Ibex Motor Policies (Lloyd's syndicate). .pounds 580 High: Provincial Insurance. . . . . . . . . . .pounds 1,258 Driver: 25-year old man in Exeter EX17 Low: Holdsure Motor Policies (Lloyd's synd). . pounds 485 High: Axa Insurance. . . . . . . . . . . . . . pounds 1,019 ----------------------------------------------------------------- One-year comprehensive cover for 1990 Rover 820i (value pounds 10,000) with no-claims discount and one named driver Source: Swinton Insurance -----------------------------------------------------------------