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Last Updated: Thursday, 31 August 2006, 08:10 GMT 09:10 UK
Car insurance costs set to rise
Car crash
The cost of insurance claims has risen sharply in the past two years
Car insurance costs look set to rise following a move by Norwich Union, the UK's second largest car insurer, to raise its rates by an average of 16%.

The firm said its hand had been forced by a similar rise in claim costs over the past two years, during which time insurance rates had remained static.

Norwich Union said claims for personal injuries had been the main reason for the rise in its costs.

Insurance for riskier customers, such as young men, will rise by up to 40%.

David Ross of the Norwich Union warned that other insurers would probably copy his firm's example.

"I think we'll find that most insurance companies will follow our lead - we're the largest insurer in the country, one of the largest motor insurers," he said.

"There is an expectation amongst various commentators in the sector that motor premiums will need to rise to reflect the increase in claims costs, particularly from the more litigious society that we find ourselves living in."

The Association of British Insurers (ABI) said costs were rising in several areas.

"The first is personal injury costs - a very large part of your premium covers personal injury - and secondly, there is a major problem around uninsured driving," said Nick Starling of the ABI.

"There's around a million uninsured drivers on the road, and all of us pay 30 on our premiums to cover those."

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