The AA sees turmoil on the global financial markets as putting financial pressure on providers.
Car insurance costs seem set to rise markedly over the next few months, experts at the AA have said.
According to the car insurance provider, the current turmoil in the financial markets caused by the credit crunch will be partly to blame for the trend.
For car insurance firms in the UK, the current ratio of costs paid out to premiums paid in is around £105 to £100 - a gap that has previously been plugged by the providers through judicious stock market investments. However, in the current volatile market - with the FTSE 100 falling by over 30 percent last year - this strategy is unlikely to work in the months ahead.
Increasing fraud and personal injuries costs, along with strong competition between providers caused by the rise of the internet, have also put pressure on the firms. As a result, the AA predicts that premiums will rise by ten to 11 percent in 2009.
Ian Crowder at AA Insurance added that the increases could be still steeper in a worst-case scenario.
"Some commentators suggest a rise of 20 percent over the next year and, certainly, a rise of that magnitude will be necessary if the insurance industry is to achieve an underwriting profit," he said.
