How falling petrol prices pushed up car insurance costs

Drivers taking advantage of lower petrol prices to spend more time on the roads have inadvertently caused car insurance premiums to rise, figures show.

The cost motor insurance policies in Britain rose by £12, or 2 per cent, in the final three months of last year to reach £594 on average. It marked the first consecutive quarterly increase since 2011, according to comparison website Confused.com.

The fall, which ended a price war in which insures have cut car cover rates by a third in four years, was linked to more people driving and causing accidents.

The total number of miles driven on Britain's roads increased by more than 2 per cent in 2014. Stephen Jones, of analysts Towers Watson, said families were able to use their cars more because petrol prices had fallen by nearly a fifth since the summer. A litre of petrol costs £1.10, down from £1.33, according to the RAC.

Heavier traffic led to more crashes, Mr Jones said, with insurers increasing premiums to protect their profit margins.

"Logically, insurers might expect more accidents and more claims [when the use of cars rises]," he said.

Figures from the Department of Transport show as 2014 drew to a close around 525,000 more cars, or 1.8 per cent, were registered as being on the road compared to a year earlier.

The rise was partly due to 2.48 million new cars being sold in 2014 – the most in a calendar year since 2004 and the fourth highest on record, according to the Society of Motor Manufacturers and Traders.

In total, drivers travelled 77.9 billion miles in the three months to the end of September 2014, a 2.2 per cent increase compared to the same time a year earlier.

Industry figures showed throughout the year the number of claims submitted were "consistently up" on 2013 levels, Mr Jones said.

Dramatic falls in oil prices, which are near a six-year low, are gradually seeping through to the forecourts.

Simon Peevers, of the RAC, said prices at some pumps were as low as £1.04 at the end of last week. Petrol in one part of Birmingham now costs less than £1, according to reports. On Monday, Asda and Morrisons cut pump prices again, taking another 2p off the price of petrol and diesel.

Steve Sanders, finance director at Confused.com, said insurance costs would keep rising.

"These latest upwards price movements are likely to fuel further speculation that we have passed the bottom of the insurance price cycle," he said.

Mr Jones said the lack of a "definitive" answer to the problem of false injury claims, typically for whiplash, was also putting pressure on insurers to keep prices up.

Insurance roundup: how costs have changed

^{Data: Comparethemarket for The Telegraph, prices to 15/12/2014}