Your Car Insurance Guide

LONDON (Reuters) - Norwich Union will increase insurance premiums for cars by an average of 16% over the next 12 months to offset the rising cost of credit, said on Thursday.

The company, owned by insurance giant Aviva, is the first major player to say recently that premiums rise significantly in a market where competitive pressures have so far kept a lid on rates, the increase in complaints despite the costs. Norwich Union said it expects others to follow.

“We stuck our head above the parapet, but you can expect to see the market following our lead,” said a spokesman. “We may lose market share, but the key is profitability.”

The premium hikes, starting from this month, ranging from 6% for policyholders with good claims records and 40% of drivers at high risk, compared with an average increase of around 5 % In the first half of the year.

In recent years have been difficult for the UK of £ 12 billion of the insurance industry as an engine of increased competition with new entrants into the market, although the release of reserves have helped to offset rising costs .

But credit rating agency Standard & Poor’s said earlier this month that insurers would have to raise prices as a fall in recent claim numbers, which has also helped to offset the rising cost of credit, is unlikely to the last one.

A June report from consultancy EMB said the market is likely to make an overall loss this year, the payment of £ 113 in claims and expenses for every 100 pounds taken in premiums.

During its first half results presentation earlier this month, Aviva said it expected “widespread action” on prices as a motor cycle nears the bottom and insurers return to market discipline and unit profitability.

Royal Bank of Scotland, the UK’s largest motor insurer through Direct Line and Churchill, said earlier this month is expected to maintain a “disciplined approach” to pricing, concentrating on more profitable customers.