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UK floods may spark motor insurance increase
Last updated at 23:22pm on 21.08.07Car insurance is set to rise sharply because of the summer floods, warn experts.
Insurance companies face an estimated £3.3billion claims from customers whose homes were inundated.
This means they cannot afford to follow their usual practice of subsidising motor insurance with profits from property insurance.
The flash floods caused chaos across the country
As a result the cost of motor premiums must rise by as much as 10 per cent, says Europe's largest firm of non-life actuaries, EMB. its annual review shows that for every £100 insurers received in motor insurance premiums, they paid out £106.
They subsidised the shortfall with reserves made up of profits from property premiums. These are expected to be wiped out by the costs of the floods.
The predicted rise will be another blow for millions of motorists who have already seen their car insurance rise this year.
Premiums are rising because, despite the number of accidents falling, the cost of repairs and medical bills is rising. Passengers are more likely to survive crashes but may suffer cripplinginjuries and make hefty damagesclaims.
Uninsured drivers involved in accidents and fraudulent claims also push up bills. Since the floods, many home insurance firms have considered inflation-busting premium rises.
Earlier this month 5million households on flood plains were warned they face large increases. The industry is bracing itself for more claims caused by floods and droughts.
The prices of bread, beer and whisky are expected to rise amid fears the grain harvest will be the worst for 20 years because of the winter's bad weather and the widespread flooding.
The cost of a brand-name large white loaf has already risen by 9p to 54p in many leading chains. This could now go as high as 65p.
