Otto Thoresen, director general at the Association of British Insurance said: "Rising claims costs from personal injury claims, excessive legal costs, insurance fraud and uninsured driving, coupled with lower investment returns in recent years, have unfortunately led to rising motor insurance bills for many customers.
In fact the motor insurance sector has not been profitable for the last sixteen years because the amount paid out in claims and expenses has been greater than that received in premiums.”
The day after the OFT announced its investigation, the Government said it would ban referral fees which are paid to insurers for passing on details of accident victims to third parties.
Pete Harrison, car insurance expert at MoneySupermarket said: “This ban is a victory for motorists who are facing rocketing premiums and we hope to see this change implemented quickly and efficiently so the benefits can be felt by motorists who are struggling to afford their car insurance.
Until then, it is vital drivers shop around for the best deal, and make their hard earned cash go further."Here, we take a look at some of the ways motorists can make sure they don’t end up paying over the odds for cover…
Don’t just accept your renewal quote
Motorists are wasting over £2.4 billion a year by sticking with their existing car insurance provider and not shopping around for a better deal at renewal time. But there is no reward for loyalty, so you should never accept your renewal quote without first seeing if cheaper cover is available elsewhere.
Research by MoneySupermarket.com shows that whopping around for a better deal can save an average of £333 - an increase of £100 (42%) on the average saving last year.
Pete Harrison said: "Providers rely on driver apathy at renewal time; loyalty isn't rewarded with a cheaper premium and drivers should do their homework to check whether they can find a better deal elsewhere.
Even if you don't think your quote can be beaten, it only takes a few minutes to make sure you really do have the best policy to suit your needs - and if not, switch!"
Increase your excess
One way you can reduce the cost of your insurance is by raising your voluntary excess - the amount you pay up front in the event of an accident. The higher the excess you choose, the lower your premiums will be, but you must ensure that the excess remains affordable, otherwise you might not be able to make a claim at all.
Don’t make modifications
Don't modify your car in any way. Adding to the value of your car though alloy wheels or expensive stereos can increase the chances of the car being stolen and in turn increase your insurance premiums, so if you want cheap car insurance you should keep any changes to a minimum.
Taking steps to improve your security with insurer-approved security equipment like a steering wheel lock or an immobiliser could also give you cheaper premiums, so it’s well worth making sure your car is as well protected as possible. Keeping it in a locked garage if possible is also likely to result in lower premiums.
Get additional qualifications
Motor insurance costs are usually highest for young drivers, as they are considered a greater risk by insurers. Taking additional motoring qualifications, such as Pass Plus, is one way in which young drivers can keep down the cost of cover.
Pass Plus fees vary, but the cost is usually around £150. If you passed your test more than a year ago, check that you'll be eligible for the discounts on offer from your insurance company before you take the course.
Adding a more experienced named driver to your policy may also lower the cost of premiums.
Pay with a lump sum
While most people can only afford to pay for their car insurance by making monthly payments, if you do have a lump sum available to pay off the full year’s cost up front, you should do so.
Insurers usually charge extra if you make monthly payments, so paying in full is another way to help keep costs down.