Ian Crowder: Insurance cover's at a premium with fraud and foul weather

INSURANCE Premium Tax goes up in January, which will add a further 1 per cent to the generally upward trend in the cost of insurance.

Traditionally, the first quarter of the year tends to show little premium movement when it comes to motor insurance. Indeed, in 2010 they fell slightly, but very quickly resumed their upward climb. But I think we can expect to see premiums continue to go up in the first quarter of 2011.

The premium increases of the past year have helped to correct reserves but the problems of fraud and claims inflation remain.

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It really is important that the government finds ways to control the growing compensation culture in the UK, and I hope that before the end of the year some positive measures to do so will have been put in place.

Lord Justice Jackson's recommendations on combating civil litigation costs and controlling "no-win, no-fee" ambulance chasing lawyers are welcome and should both curb those annoying text messages urging us to claim for accident injury we may or may not have suffered and limit the associated legal costs.

I do think, however, we have seen the worst of the car insurance premium increases.

Over the next few months, premiums will continue to rise (probably by another 20 per cent or so) but at a much slower rate, until once again we reach a point where competitiveness takes over, which will naturally hold premiums in check.

More sinister perhaps, is the call from the EU Advocate General to end the use of gender in calculating car insurance premiums.

If this happens - and the AA is urging the government to resist it as strongly as possible - it will lead to very sharp premium increases for women, particularly younger women, who make fewer and smaller insurance claims than men.

However, if such a ruling becomes law, the industry will have about three years to adjust.

The cost of home insurance will continue to rise. Having said that, home cover represents good value. Most of the 20 per cent rise since 1994 has happened over the past couple of years for buildings insurance while there has been little change in the cost of contents cover.

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However, home insurers are concerned about the growing number of extreme weather claims: whether it's snow and ice, hail, or exceptionally heavy rain causing flash floods or storm damage.

The UK has even seen tornadoes, which while isolated and short-lived, can very quickly put paid to the most robust roof. So we can expect the industry to start building its reserves in order to be able to meet the cost of weather damage, which will see premiums rising.

Add to that uncertainty about what happens after the so-called "statement of principles" between the insurance industry and the government ends in 2013. This agreement is designed to ensure those in flood-prone regions can obtain insurance, and the year will see intense debate on how the industry will respond to growing flood risk.

The UK is unique in Europe in that flood cover is included as standard in home insurance contracts - in most countries flood insurance is taken out separately or is funded by the government through a taxation system. That might be a possible future solution for the UK, but meanwhile, the industry is worried that many homes could become uninsurable, and thus un-mortgageable.

The important thing is that you keep your car and home insured. Attempting to drive without cover will very quickly lead to your being detected by police using automatic number plate recognition technology. And from January, Continuous Insurance Enforcement comes into effect, which means that it will be an offence to keep a car that is neither insured, nor subject to a SORN (Statutory Off Road Notification) issued by DVLA. The new rules apply even if the car is kept on private land.

So far as your home is concerned, perhaps a good New Year resolution might be to check your level of cover.

Ian Crowder is insurance expert at the AA