Premiums have caught up with claims

The price of fully comprehensive cover grew by 3.6% last year while third party, fire and theft cover grew by 3.4%, according to the research group Datamonitor.

Although motorists were still having to pay more for cover, increases in 2002 were low in comparison with hikes of 10% or more seen in recent years.

Datamonitor said this was because motor insurers had managed to move back into profit thanks to previous price increases.

Higher claims

According to the recently published AA Premium Index, the average cost of comprehensive insurance leapt by 58% between 1999 and 2003 while non-comprehensive insurance cover soared more than 84%.

Insurers blamed the increasing cost of cover on higher claims - boosted by the rise of no-win no-fee court actions and the decision by the government to charge insurers for the cost of treating the victims of road accidents.

Claims raced ahead of premiums to such an extent that the motor insurance industry fell hundreds of millions into the red.

The Association of British Insurers (ABI) says that insurers are paying �20m a week in personal injury claims.

Malcolm Tarling, general insurance spokesman at the ABI welcomed the news that premium increases had slowed.

"Finally premiums have caught up with claims, at one stage insurers were paying out �1.20 for every �1 they got back in premiums," he said.