UK motor premiums have jumped by more than 40% in the 12 months ending March this year.

Major insurer AA Insurance says motorists are now paying an average £892.08 ($1383.68) to insure their cars, compared to £633.55 ($982.68) in March 2010.

The news will come as a relief to Australian insurer IAG, whose UK operations have been caught in a spiral of increased personal injury claims and lower returns. A spokesman confirmed IAG has raised its UK motor insurance premiums by 40%.

“We have been pushing for substantial rate increases and raised premiums by 20% in the first half [of the financial year] and another 20% currently,” he told insuranceNEWS.com.au.

“We will report on the situation when we update our results, but we are pushing for further rate increases.”

The AA survey found UK motorists aged between 17-22 are paying an average of £2431 ($3771.04) – an increase of 64% compared to March 2010.

Breaking this age group down on gender, young men are paying premiums of £3052 ($4734.95) while women face annual premiums of £1767 ($2741.39).

The Association of British Insurers (ABI) says the rising cost of UK motor insurance is caused by rising personal injury claims and legal fees.

ABI Director of General Insurance and Health Nick Starling says unless action is taken to curb the rising cost of settling personal injury claims, motor insurance premiums will continue to rise.

“Putting the brake on ambulance-chasing lawyers and claims management firms cannot come a moment too soon,” he said.

“Motorists have rightly had enough of paying for excessive legal costs, which add an extra 10% to the cost of motor insurance.” 

The ABI says that for every £1 ($1.55) motor insurers pay on a claim, an extra 87 pence ($1.35) is paid out in legal costs.

Mr Starling says the UK Government’s plan to reform civil litigation will help with reducing legal costs, thereby leading to cheaper insurance in the future.

“What we now need is a ban of referral fees – where details of potential personal injury claimants are sold on to solicitors and claims management firms,” he said.