According to recent research by the AA, the average cost of car insurance has leapt up by a record 14%, with further rises forecast. Average insurance premiums for comprehensive motor cover soared into September, the largest increases seen by the AA since it began to monitor the motor insurance market in 1994.

Simon Douglas, the Director of AA Insurance, was reported as commenting: Most drivers will be seeing sharp increases when they renew their annual insurance premiums . The index suggests that 89% of insurers have increased their premiums by more than £5 over the past quarter. Only 2.5% reduced them.'

Furthermore, vehicle insurance premiums could climb by 20% before they level off. Douglas reportedly added: Car insurers are facing fast rising costs, reserves for paying claims are depleted and investment income has fallen, largely because of the recession. Despite motor insurance being one of the most competitive markets in the UK, insurers have little choice but to put premiums up.

In other car finance news, finance providers are calling on the government to support their industry.