Car insurance premiums are going up by the fastest rate in 15 years, according to AA Insurance. The insurer, which produces the British Insurance Premium Index each year, found that premiums have shot up by an average of 5% in the last three months alone. This is the biggest quarterly rise since the monitoring began back in 1994.

The annual figures are even worse – on average, premiums have gone up by 14% since last October, a huge increase that is surely being felt by drivers across the country.

Car crime is one of the reasons for the increased premiums. Expensive vehicles are being targeted by thieves, and claims on these help to push up the premiums for all the other drivers.

Other factors include a rise in fraud levels and increased costs associated with injury claims. Fraud alone adds an extra £44 onto insurance costs, and the amount spent on injury claims was over £9.6 billion last year. Essentially, what this means is that insurers are paying out more in claims than they are receiving in premiums.

The average fully-comprehensive cover now costs £821, up £100 from one year ago. But it is young drivers who fare the worst: third party, fire and theft premiums have gone up by a massive 9.3% in the last quarter and by 17.6% over the last year. The average premium now is £1,059.

Simon Douglas, director of AA insurance, said that “up to £110 is being paid in claims for every £100 taken in premiums – a situation that is clearly unsustainable”. He also warned that “most drivers will be seeing sharp increases when they renew their annual insurance premiums”.

The recession seems to have brought out the worst in some of us, with over a million Brits saying they would stage a car accident to make a claim on their insurance.

We are of course all keen at times like these to save a bit of money but this would seem a step too far and one which costs the insurance industry dearly, with the knock on effect of increasing premiums for honest motorists. Indeed, the ABI (Association of British Insurers) has calculated that the cost to the industry amounts to a staggering £4 million a day, adding £40 a year to each motorist’s premium.

Research carried out by moneysupermarket.com has shown that 1,020,000 of us would consider making a fraudulent claim and, perhaps more worryingly, that 340,000 have already done so.

When it comes to the sexes it seems that men are twice as likely as women to give into their criminal tendencies, whilst geographically, Londoners are the most dishonest. As far as age demographics are concerned, motorists in their twenties are most likely to commit fraud.

The insurance industry categorises such fraudulent activities into three separate headings: staged, induced and contrived accidents. Staged accidents are where two vehicles deliberately crash into each other to make a claim. Induced accidents are where a motorist sets out to make an innocent party crash into a vehicle (or Crash for Cash as it is known in the industry) e.g. by braking sharply. Contrived accidents are where the claim is totally fabricated and no accident actually happened.

However great the temptation, would-be-crooks should bear in mind that not only is this practice illegal and one which endangers innocent lives, but, if found out, they face prosecution as well as finding it impossible to obtain cover in the future.

The Government’s new Continuous Enforcement programme has come under fire from Direct Line insurance, which claims the fines are not large enough to be an effective deterrent.

The programme will make it an offence to keep an uninsured vehicle even if it is not actually being driven, but Direct Line claims that the fines are simply too small to put many people off driving without insurance.

Direct Line has highlighted that the on-the-spot £100 fines for being caught without insurance can be reduced by half if they are paid on time. This would mean the fine would be less than that paid for not taking out a TV license or for overfilling a bin. This, according to Direct Line, makes the fine out of proportion to the offence committed.

There are an estimated 1.7 million uninsured drivers on Britain’s roads. This leads to £500 million in costs annually, which adds an extra £30 to our premiums as a result.

The main problem area is with young drivers. Premiums for this age group are huge, up to £3,000 a year in some instances, and there is an obvious temptation to skip insurance and try to get away with it. Direct Line says that almost a fifth of uninsured drivers are under 20.

An average of 160 people die in accidents involving uninsured drivers each year, and Direct Line is calling for a rethink of the new programme that is going to come into force in the next two years.

The director of motoring underwriting at Direct Line, Andy Goldby, said “we welcome this initiative”, but added that “the severity of penalties must act as a deterrent”.