Tough competition in the UK motor market has forced premiums down for the second time this year, continuing a trend of price volatility that is playing havoc with insurers.

An AA Insurance benchmark study of the cheapest premiums shows the average comprehensive car insurance policy fell 2.9% in the third quarter, although overall premiums have risen 5.6% since last year.

In recent years UK motor insurers have struggled to make headway amid fierce competition.

Last month Royal & Sun Alliance declared it had lost patience with the UK mid-market car insurance business, announcing plans to exit the sector early next year.

IAG is also rumoured to be pedalling its underperforming UK car insurance division after years of sustained losses.

AA Insurance director Simon Douglas says while the motor market remains incredibly competitive, the average cost of a premium does not show pricing fluctuations.

“Competition is tough… forcing many companies to reduce premiums despite the fact costs show little sign of abating,” he said. “Nevertheless, some are still increasing premiums.”

Mr Douglas says premiums may fall further once measures to stem the tide of false claims take affect. Prime Minister David Cameron has promised to cut fixed fees that lawyers receive for each successful personal injury claim, and introduce a tougher burden of medical proof and the use of in-car technology.

“Whiplash injuries continue to pour in and, under current legislation, [it is] difficult to prove whether or not a claimant has suffered,” Mr Douglas said.

Faced with 554,000 whiplash claims a year, totalling £2 billion ($3.06 billion), Britain has seen motor insurance injury claims rise 70% in the past six years – despite causalities from road accidents falling 23% over the same period.

Scotland has the cheapest car insurance premiums in the country, while Manchester and Liverpool are the most expensive regions to acquire cover.